Motley Fool Hidden Gems Investing - The Big Macro Gets Bigger

Episode Date: July 12, 2024

The Fed and big players in the market are keeping an eye on unemployment and the federal deficit too.  (00:21) Ron Gross and Bill Mann discuss: - How Fed Chair Jerome Powell and Jamie Dimon have more than inflation on their mind when it comes to the interest rate picture – they’re watching unemployment, the federal deficit, and spending.  - Why bank earnings were a bit of a mixed bag, and Delta’s results show the pain may continue for airlines. - A small acquisition from AMD that could be a big deal in the AI race, and Costco deciding to finally raise the price of its membership tiers.  (19:11) We kick off FoolFest 2024 with a trip into the vault – Motley Fool CEO Tom Gardner with author Malcolm Gladwell in 2014 talking through David and Goliath, the lessons that can be borrowed as we look at small disruptive businesses, and whether titans can hold their lead in major industries.  (34:11) Ron and Bill break down two stocks on their radar: Elf Beauty and Charles Schwab. Stocks discussed: JPM, WFC, DAL, AMD, NVDA, COST, ELF, SCHW Host: Dylan Lewis Guests: Bill Mann, Ron Gross, Tom Gardner, Malcolm Gladwell  Engineers: Steve Broido  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Whatever lies ahead, don't change your morning. Let your morning change you. Discover Coffee Plus on Nespresso.com. We've got the big picture in full focus and a little preview of FoolFest 2024. 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 Analysts Bill Mann and Ron Gross. Fools, great to have you both here. How you doing, Dylan? Dylan, it's really hot outside. Just a bit. Just a bit.

I was not informed of this. Listeners, I hope you're staying cool wherever you might be, especially if you're in Washington, D.C. We are going to be talking through a bunch of stuff this week. We've got a look at how one chipmaker is trying to seize some of the AI action, a watershed moment in price hikes, and, of course, stocks on our radar. We are going to kick off, though, looking at the big macro. Ron, fresh inflation data out. We have CPI. We have PPI numbers.

We have comments from Fed Chair Powell. Where do you want to start? Oh, Dylan, just when you thought perhaps the data would give us some direction for interest rates, we get contradictory information this week. Interestingly, the market seems to have shrugged it off. Friday, very strong market. But let's break it down a little bit. Friday's wholesale price metric, which is the producer price index, or PPI, rose more than expected in June. That's basically a negative indicator unless you're a big fan of inflation. The PPI was up 0.2% last month. It was expected to be up only 0.1%. Over the last year, it's up 2.6%.

So we're doing pretty well relative to a year or two ago, but this was a so-called hotter than expected report, and the May number was also revised higher. Now, that contradicts the number we got earlier in the week, which is Consumer Price Index, or CPI. And that showed that headline inflation declined on a monthly basis and now sits at 3% year over year. That was the first time since May 2020 that the monthly rate showed a decrease. Now, just in case you're not sick of inflation metrics enough, the Fed's preferred inflation metric is the Personal Consumption Expenditure Price Index, and that will be released on July 26. So everyone hold your breath. I know you can't wait, but July 26 will be here soon enough. I love the thought of someone being a fan

of inflation. Yeah, painted chest, sign at the arena, just absolutely stoked. Ron, so if we look in a vacuum at the inflation side of the Fed's dual mandate, what does it portend when it comes to potential rate hikes or rate decreases? Well, during the week, Fed Chairman Powell said rates will likely go lower. I don't think there's any misinterpretation about that. It's a matter of when and how much. And he signaled, hey, don't get used to where we were between the financial crisis in 2008 and the pandemic, when rates were close to zero or zero. It's unlikely we're going to get back to that. If you had asked me during the week if rate cuts were coming, I would have said after

CPI came out, I would have said likely in September. On Friday, when PPI came out hot, I'm less sure. Markets are still indicating, futures are still indicating that there will be a cut in September, one of potentially two or three maybe this year. We'll have to see how the data continues. but rates are likely going lower, but they will stay higher than we have been used to over the last decade or two. Zooming in on some of the comments from Fed Chair Powell, one thing that jumped out to me and seemed like a little bit of a tenor shift this time around, Ron, was a focus

on the employment side of the Fed's mandate. Talking about here, elevated inflation is not the only risk we face. And Powell going on to say reducing policy restraint too late or too little could unduly weaken economic activity and employment. We've been talking so much about the inflation side of this. Jobs are coming into focus here, too. Yes, the dual mandate, if they only had to worry about one thing, the job would be significantly easier. But they've got to worry about both. Unemployment currently 4.1 percent. That's ticked up from the threes over the last year or so. But that's what they want. The Fed is trying to slow the economy by keeping rates higher. So don't be surprised by that. Labor has been pretty good. 4.1 is still

pretty much considered full employment. So that's pretty good. And inflation coming down at the same time, they may have just engineered that soft landing that they're hoping for. Time will tell. When you hear things like this, Ron, one of the things that's really important to note about the Fed is that they don't have like a plasma knife. What they have is a giant sledgehammer in terms of bringing liquidity in or out of the market. So one of the things that they are doing is they are predicting what the market is going to be when any of this liquidity added or subtracted matters,

which tends to be six to nine months after the move. So they really are trying to bend their headlights around corners. I would really like to see a Plasma Night from the Fed. I don't know what it would look like as a monetary instrument. I don't even know what it is. It sounds cool. It sounds interesting.

I'm here for it. It's very precise. We we had comments from Fed Chair Powell. We also had comments this week from J.P. Morgan, CEO Jamie Dimon. We tend to pay attention when he speaks. Bill, what did you see in the commentary from Dimon? Well, he did. He did say that he saw the inflation coming down, but he has made a point and he's made this a couple of times before that there are inflationary forces in front of us, including fiscal deficits. And one of the things that he really pointed to was the restructuring of trade. And one thing that we have to remember is that we have benefited and not everybody has benefited, but we as financially have benefited from being able to essentially export inflation to China over the last 40 years.

And one of the things that that Jamie Dimon has pointed to is those days are over, both from a from a geopolitical standpoint and from the fact that China is simply not the cheapest manufacturing environment anymore. So we don't get the benefit of being of lower prices by virtue of selling out of China. And he's pointed to that in the past. He's bringing it up again because I think that he's saying we need to recognize the fact that the game has absolutely changed. One of the other things I'm noticing, just tying Diamond's comments and Powell's comments together here a little bit, Bill, is the scope of considerations is getting larger and larger. And we are starting to kind of put more of the overall economic machinery into focus as we're looking at rate outlook, as we're looking at economic outlook. It's not just a matter of inflation anymore. Yeah, it's not just a matter of inflation anymore. And, you know, I almost don't know how to think about this, except to say that Jamie Diamond and Jerome Powell are pretty smart people.

So maybe we should assume that they know what they're talking about here. But Jamie Diamond is the one who is who is probably most credibly ringing the bell that, hey, look, all of the money that we have poured into the federal balance sheet at some point, that has to be paid off. It has to be maintained. And we really should have an open conversation about it. In addition to the commentary from Diamond, we also got some updates on the earnings results from JP Morgan and other banks, Wells Fargo and Citi. Ron, you did a dive into those results. What jumped out to you? Yeah, they all kind of started coming out on Friday and some were better than expected. But I think my feeling is overall, they were generally not that great. JP Morgan's quarterly profit fell. That is excluding some one-off gains from their stake

in Visa. But their operating profits fell. And that's even as their revenue was higher than Wall Street's expected. And they had a really nice jump in investment banking fees. If you move over to Wells Fargo, they had to cut their annual outlook. Their profits slipped as well. They're blaming net interest income being down and short of expectations. Now, Citi was up 10%, not too bad. Interestingly, I don't think of Citigroup as a strong investment banking presence, but their investment banking numbers were strong, and that helped them post higher profits. They focused on the fact that investment-grade bond issuance was strong, a rebound in the IPO market, although it's still not where it has been in past years. Merger activity is somewhat robust

that helped them as well. So kind of a mixed bag. But overall, I would say the markets and myself included, we're not that impressed by the results. Some of it, though, Ron, has to do with the fact that the large banks have had a really good performance from the stock market this year, particularly as you compare them to the midsize banks and the smaller banks. And I think some of that has to do with still blowback coming from the Silicon Valley bank collapse last year in which one of the themes that came out from it was, hey, you're actually maybe taking more of a risk with your deposits than you thought. And one of the easiest ways to alleviate that risk is to concentrate your deposit franchises on the larger banks. So they have benefited, I think, in an outsized way from the crisis from last year. All right, coming up after a quick break, an acquisition shows that AMD is gunning for

NVIDIA and its AI opportunity. Stay right here. You're listening to Motley Fool Money. You just found out that your sales team is at risk of missing quota. Don't panic. Just ask Rippling AI. Since it's built on your real-time people and business data, Rippling AI can pull metrics from Rippling and Salesforce into a meeting-ready dashboard showing quota attainment, headcount plan, and monthly revenue to quota by region. In seconds, you'll see exactly what's behind your quota risk and fix it before it's missed. Question answered, action taken, crisis averted. When you have critical business questions that need answers,

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and ron gross chipmaker amd went shopping this week and scooped up silo ai a private ai lab based out of europe bill they're going to be paying 665 million in an all cash deal for silo what exactly are they getting here why are we even bringing this up a 660 okay i mean you wanted to bring it up it was your idea yeah take us into the production process here you were the one bill who raised this as the topic you wanted to hit this week. We're talking about a $665 million deal for a multi-hundred billion dollar company. AMD is massive.

But here is why this is important. AMD has been trying to catch up in the GPU business with NVIDIA. And it hasn't ultimately up until now been about creating a better GPU because NVIDIA has a proprietary software platform called CUDA that everybody defaults to in this business. So AMD bringing in silo AI is essentially trying to get to the whole product stage where they too will have an internal development platform

to go along with their GPU. So yes, that's exactly why we're bringing it up. And I resent the question, Dylan, because this is a big deal, much bigger than the amount of money that they paid. So if we are to pay attention to the important elements of this story, Bill, it is, I think that there is a focus, an increased focus on not just the hardware that enables AI, but the software that is layered on top of it that makes it even more useful. Yeah. And it's not even just that. It's that if you have, if you have hardware and software and they operate within a single environment, it's inherently more valuable for the programmers themselves. So AMD, obviously Lisa Su, one of the best CEOs in the industry, has long seen this as

something that they really needed to forge and get to the other side in order to take on what is essentially a monopoly uh with nvidia all right over to the friendly skies results in from delta this week and the market didn't exactly love them shares down around five percent this week ron what was in the results yeah you know despite record high quarterly revenue um the fact that they missed on the earnings side um really sent investors heading for the hills and the main culprit is discounted airfares and there are pressuring earnings really across the board there are just too many seats now in the u.s market as a result of the post-covid frenzy to increase capacity and higher fuel costs also aren't helping they're hurting margins as well

the main issue is that as the covid19 pandemic ended airlines try to catch up with travel demand by buying planes hiring staff increasing flight plans and now the supply of seats just exceeds the demand for them. And thus, you have discounted domestic fares, and that hurts margins. So for the quarter, Delta was up 5.4% on the revenue side. They are focusing on high-end offerings, lounge access, better seating that is paying off for them. Those things are now a significant piece. Over half of Delta's revenue comes from those sources, such as loyalty programs and premium ticket sales. But they're earning less money per seat flown each mile. Adjusted earnings were down 12 percent a result of those margin problems ceo said they are taking pretty

significant corrective action across the board across the industries summer travel looks very very healthy he said they did reiterate full year guidance training is seven times right but the industry is also at four or five times so it's probably the better of all of them uh seven times sounds really cheap um but buyer beware when it comes to airlines have you guys flown this summer yes here's what i want to know are these cheaper seats in the room with you now because i certainly haven't seen uh they they aren't for me bill but i'm also notoriously a last minute traveler and last minute booker so i don't know that i'm the right benchmark for that fair that sounds like the perfect thing though for us to throw out to our listeners and get some boots on the ground

reporting. Podcastsatfool.com is where you can send those stories about your own fares. All right, bringing us home for this segment. It's been a good run, but even Costco is raising its prices. The ultimate sign of the times, Ron. The company announcing it will be raising the price of its membership for the first time in seven years. Gold star members will go up $5 to $65. Executive will go up $10 to $120. Did you see this one coming? Yes, it's been on the radar for a while now. So certainly no surprise. As a consumer, I'm okay with it. As an investor and an owner of the stock, I'm absolutely okay with it. It's one wonderful thing about the Costco business model that they do have pricing power to continue

to increase these management fees from time to time. About 56% of Costco's operating profits comes from membership fees, not selling 200 pounds of licorice or whatever your favorite thing is at Costco. It used to actually be higher. It used to be maybe 75% of operating profit came from membership fees. And this hike will get that higher once again, maybe not back to the 70 or 80 mark, but it's a wonderful business model. As long as they keep us happy by giving us value priced items and keep us coming into the stores and keep us paying that membership fee, that accrues right to the bottom line. And it's a wonderfully run company. Costco is a perpetual motion machine, if you think about it, right? Their membership was $25

in 1982, and today it's $65. I defy you to find a slower rising price anywhere in American commerce. So this is a company that focuses so intently on the customer. There are lots of companies that claim it, but Costco lives and breathes it. So think about their $1.50 hot dog special and how it's never gone up in price. Costco probably loses money on that, but they make up for that choice by looking at a fast turnover item with ultra thin margins and recognizing that it requires creativity. So where else do these sorts of things matter? Costco is one of the best deals out there for the consumer. Stock's been up a lot this year. I like the price rise. Bill, do you think there would be more outrage if they increased the price of the hot dog rather than the membership?

A hundred percent. Certainly in the media. Absolutely. People are watching that so intently that if that ever happened, I mean, there would be, I mean, first of all, there would be, you know, there would be warfare in Costco headquarters, but yes, it would be a big deal of the dudes too. I would be remiss if I didn't mention that the shares are now trading at 50 times forward earnings as a result of the wonderful increase in the stock price over the last year. We've been saying it's expensive at 30 times, at 40 times. Here we are at 50 times. It's one of my largest personal positions. I haven't sold any. Makes you wonder what returns can look like if we're at 50 times now. I think it's worth thinking about. I just happen to think it's

one of the finest run companies in America. And I'm happy to be a shareholder. If you look at the numbers, you start to wonder at what price. Yeah. I don't know that there's a huge opportunity in Costco now, but there's probably no other company at this valuation where you would be more confident with, okay, they're going to grow into it. And I think in general, given everything we laid out earlier in the show, focusing on quality businesses, ones that consumers love, Probably a good place to have your money at this point. That works, yes. All right, Bill Mann, Ron Gross, fellows, we're going to see you guys a little bit later in the show.

Up next, we're heading into the vault for a very special interview to kick off this summer's FoolFest celebration. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis. This summer here at The Fool, we're returning to a time-honored tradition, FoolFest. This Sunday through Tuesday, we'll be with Motley Fool members here in Washington, D.C., talking stocks and learning a little bit about how the world works and where it's heading. This year's FoolFest is a particularly special one. We're celebrating our 10th.

As part of the pre-event festivities, this week on the radio show, we're revisiting one of the interviews from that first FoolFest back in 2014. It's Motley Fool CEO Tom Gardner and author Malcolm Gladwell talking through his book, David and Goliath, and pulling lessons out that we can borrow as we look at small, disruptive businesses and whether titans can continue to hold their lead in major industries. Malcolm, what would be great is just to have you start by, first of all, thank you so much for coming and spending time with us. Just outline the overall premise of the book. Well, I was interested in a book in describing in asymmetrical conflicts, or more generally in this notion of, is our understanding of what an advantage is accurate?

and that's the theme that runs throughout the whole book so if our understanding of what an advantage is is so accurate, why does the weaker party in a war win as often as it does? Because the weird thing about, if you look at histories of warfare, is that the quote unquote underdog, the much smaller party in any kind of conflict, wins an astonishing number of times, which suggests that maybe We're fixating on the wrong variables in explaining conflict.

And then I run with that idea and talk about schools and education and dyslexia and all kinds of entrepreneurialism and all kinds of things along those same lines, wondering whether our kind of intuitive accounting of these things is accurate. What I want to do now is search for patterns in your work, in the book, that might overlay nicely to looking for disruptive, smaller companies that might succeed. When we make the assumption that Microsoft will, of course, squash every business that gets in its competitive space 15 years ago, and then that doesn't end up happening. Or we assume that Apple must win because Apple is of the size and scope that it is today. So we're going to look for more disruptive companies, smaller companies, and see if these principles help us find them. Number one would be occupy a spot off the beaten path. So maybe the story of the Impressionists and the Salon. Yeah.

Yeah. So the Impressionists are a really interesting group. They come along at a time in the art world where in Paris, where in France, where there was something called the Salon, which was the big art show every year and what every artist did was they competed to get accepted into the salon and the salon was very conservative

and had very strict ideas about what was an acceptable painting and the Impressionists were doing something radical and they faced this choice of should they try and get their paintings into the salon which would mean

they would have to dumb them down and make them more conventional or should they go off on their own and give up all of that prestige and do their own thing, and they decide to give up on the salon and do their own thing, and they start their own little show, which in the beginning no one goes to, which is just in a little upstairs in some little room.

And that ends up being the greatest thing they ever did because they privileged the freedom to do what they wanted over conforming to a, as it turned out, dying set of standards about what art represented. And that, you know, that is a tried and true principle for revolutionaries, that before you can challenge the status quo, you need to leave the status quo, right? You need to find a safe haven where you can pursue what you think is the right answer, free of the deadening constraints of conventional thinking. Warren Buffett, Omaha, Nebraska, leaving New York, unable to get a job in a way in New York City,

and goes off to Omaha where he can carve his own space out. A little bit of the IKEA story in Poland. Yeah. Oh, yeah. Well, I love that story. Yeah, Ingevar Kamprad, who has this brilliant idea, which is if you make furniture and don't assemble it, you can ship it flat. So you can save on assembly on the manufacturing line.

And you can ship it flat and save on shipping and sell it for much less. And then he gets shut down in the late 50s by his competitors. He's basically blacklisted in Sweden and facing bankruptcy. And he has a second great idea, which is Poland, across the Baltic Sea, right? Really, really cheap labor, lots of trees, you know? And IKEA is furniture. And communism. Yes, and communism.

He's able to pull it off to build up. It's an extraordinary story of how he manages to build his first plant in Poland because it wasn't easy to build a modern manufacturing facility in communist Poland in 1961. But it is that notion that he had to, and also he goes to the, it's the height of the Cold War, and he goes to the enemy. It's like going to North Korea today, essentially. It's the same thing. But he is so convinced of his vision that he's basically, of his business model, that he's willing to thumb his nose at everyone and leave the country where he came of age.

He's never really gone back. So third factor, you don't overplay your greatest strength. i've phrased it that way from your discussion of the inverted u-curve and maybe explain that concept and see if that's a should a david even though he has a strength not think about overdoing it or is it he's still on the this side of the u-curve and should be anchoring hard on his strength as far as he can take it yeah the inverted u is um a chapter where i talk about how i think one of the kind of mental models we use to describe relationships between resources and outputs, really leads us astray.

So we have this notion that if a little bit of resources, money, makes the problem better, then a lot of money will make the problem, best of all, go away the most. And the answer is no. In most of the situations where we look at relationships between what you put in and what you get out, the curve does not look like that. the curve looks like that or rather the curve looks like a u that in the beginning things get better and then they flatten out and then they get worse so i use the example of of class size it is absolutely the case that if classes are very large and you make them smaller

kids will do better but then there's a long stretch between probably you know the high 20s and the low 20s where you could make a class smaller and you will see no effect on kids um performance. And if you go too far below 20, kids are worse off. There's really interesting, compelling evidence of this, that it is not a good thing for a child to be in a class with 14 children, 14 other students. One, you cannot get a discussion going with 14, not enough voices in the room. Two, one bad apple can totally ruin a small class because there's nowhere for that person to hide. And thirdly, that children who are struggling, what they need most of all is not more attention from the teacher. What they need most of all is another person, a peer, who is

learning at the same pace as they are, so they don't feel marginal and isolated. You need to have someone who's asking the same questions, struggling with the same problems. If a class gets too small, the struggling kids are just wiped out. And that's something, you know, a lesson that is so routinely violated. You know, I made fun of private, expensive private schools in my book because, I'm sorry, they deserve it. They take $50,000 of your money and they boast to you that your kid is in a class with 12 other students. Whoever said that's a good thing, right? All they're doing is justifying the fact that they spent take took 50 grand and they have 20 steinway pianos that was the hot school where you i thought brilliantly pointed out that that school that a

school like that is often serving its primary customer which is the parent yeah not actually the outcome for the student it's to impress the parent that we have the the very best of every piece of equipment by the way where is it written i even find the whole notion that we that the that the point of a classroom is to maximize the attention that a student gets from a teacher is insane. A student has to go through extended periods where they are forced to solve the problem in front of them by themselves. That's called life, right? The teacher should be there for when you are truly stuck and also should be there to get you to the point where you can solve it on your own. It is not a good thing to have a teacher hovering over your shoulder at all times. That's

debilitating. So it goes to this idea that too much, we so often make the mistake where we push our use of resources well past the point where they are useful. There's a business writer named Les McKeown, and he was the first person to make me see that a company with too much cash, that can be a weakness. Oh, yeah. Because of course, when as an investor, you're thinking, well, at least I know they've got this huge safety net of billions and billions of cash set aside. But in fact, one of the lines from the book, wealth, you know, shirt sleeves to shirt sleeves in a few generations, that having too much money actually can create a lot of problems and bad incentives inside that system. I'm convinced this is at the heart of the R&D drought in big pharma.

I think that they have overspent on R&D. I mean, if you compare, if you look at it, it's really fascinating. So we know, looking over the last 25 years, that the bulk of innovation in the pharmaceutical arena has come from smaller biotech companies, right, who are spending, over the course of developing their products, a fraction of what the big companies are spending. And the reaction of the big companies, of big pharma to that problem,

is to spend even more money, as opposed to asking, what happens when, does having virtually unlimited resources available for R&D change the nature of the questions you ask and change the nature of the strategies you pursue and change the nature of what you consider to be a worthwhile product? And I think that a lot more time should be spent on wondering whether they have gone too far when it comes to it. One last David principle that we might apply to looking at leaders and companies they truly have nothing to lose yeah i mean i i'm always really interested by the kinds of the difference in the strategies that you pursue when you are in a position of relative strength and when you are in a position of weakness and

um the there is a marked difference in um we know that we all know that intuitively that when our backs to the wall, we consider a wider range of options than when we're in a comfortable position. And that makes, you know, that means, it's what we all know, that a cornered rat is a very, very dangerous opponent. Not that struggling companies are rats. We have to close to let you get on your way, but could you just close by sharing a little bit about how you think about, how we should think about our disadvantages in life? Anyone in the room that sees, I have this weakness i have this flaw i have this thing that's held me back or this shortcoming um or i see it in my child i see them struggling with this how should we think about disadvantages well as uh you know

it's it is a cliche but they as learning opportunities there are you know you can learn by capitalizing on your strengths or you can learn by compensating for your weaknesses the compensation path is far more difficult it's far more rare but it's way more powerful the things you learn as you are working around or through adversity are lessons that are far more deeply felt than the things you learn

because of your strengths and so you know that I chose dyslexia in my book for a reason because there are just so many examples of people who refuse to deal that is just about the most serious impediment you can throw in the path of a child and the idea that there are

lots and lots and lots and lots of really really successful people who when faced with that impediment at the age of six and seven just were undaunted by it just went about their just found another way to kind of go about the business of getting through school and then

ultimately through life That, to me, is such a beautiful example of how we radically underestimate our ability as human beings to deal with adversity. I mean, I think we're much better at it than we think. In fairness to the Goliaths, Microsoft and Apple have continued to win over the past decade by pushing into new nascent markets like the cloud and subscription services. But David has logged a few major victories, too. Companies free of the status quo like Tesla and electric vehicles, Netflix and streaming, Adobe and Salesforce and software as a service have all transitioned from David's to Goliath's in their own right since this conversation happened at our first FoolFest back in 2014. And we think many more Davids will come in the next decade. Listeners, we're excited to track them and bring them to you here on the show.

Motley Fool members, you can catch the conversations from this year's FoolFest on our premium site. And podcast listeners, we'll be bringing some of the highlights and interviews from FoolFest, like Kava CEO Brett Shulman and Morgan Housel, here to you on Motley Fool Money. Coming up next, we've got Ron Gross and Bill Mann coming back to bring us a couple stocks on their radar. Stay right here. You're listening to Motley Fool 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 i'm dylan lewis joined again by ron gross and bill mann the week is

coming to a close gentlemen but our work is not going to wrap friday afternoon we're going to be meeting up with Motley Fool members this weekend at Fool Fest in Washington, D.C., keeping a long held tradition moving forward. Ron, we got members coming into the city. What are you most excited about? It is so wonderful. One or two times a year, we actually get to hang out and talk with and present to our members. And it's literally energizing. It's so wonderful to see everyone. some faces year after year after year you see the same the same folks you catch up it's almost like seeing family at a family reunion um it's always a wonderful time bill what about you my wife all the time makes fun of me because i describe people as my friends who i've only met like

online through the motley fool until we get to the fool fest right like if you're not part of that environment maybe it sounds a little bit weird but yes we are seeing people for this one event a year that we truly love and and ron's exactly right it is it's so energizing to be able to interact directly with uh with our friends some of whom have been with us now for 20 plus years it's gonna be great we have the members coming in we also have some of our contributors and some of our uh fellow analysts and fools from all over the country coming in it's gonna be a really awesome time we'll be taking some of those conversations and airing them here on the podcast over the next week or so so if you're not at fool fest you'll be able to get some of the content too

All right, let's move over to stocks on our radar. This week, we've got the OG engineer of Motley Fool Money, Steve Broido, behind the scenes. And he is going to be the one hitting you with a question. Ron, you're up first. What are you looking at this week? Steve, I've been hearing a lot of talk about Elf Beauty, ELF, which I know nothing about. So I decided to take a look. I think I might actually like what I see.

They specialize in cosmetics and skincare. ELF is eye, lip, face makeup. They do it at a really attractive price point. They're capturing market share from lots of the bigger players. They're growing really significantly. Last quarter, sales jumped 71% year over year. They use viral marketing, affordable pricing. And as I said, they're really gaining market share pretty significantly.

They see opportunities overseas. They're growing very quickly there. Now, trading at 61 time forward earnings. so you know growth better continue at a pretty significant clip there for a value guy like me to really be interested but it looks interesting to me steve a question about elf beauty you bet um there's a big movement in skincare to move it all online so you're subscribing a subscription service is this an elf's future to be a subscriber of elf's products from what i understand it is in their present and their future in a big way yes all right bill what is on your radar this week

A company that I've liked for a long time, Charles Schwab in 2023, was one of the latent victims of the collapse of Silicon Valley Bank, where people naturally went and said, okay, who's next? And Charles Schwab suffered from something called cash sorting, which basically meant people had all their money at the brokerage sitting in non-interest-bearing vehicles, because why bother? There was no such thing as interest, and have moved it. So Charles Schwab is in a much better place now, but the stock has not fully recovered. So I'm really interesting to see. They report on Tuesday they've been showing net new increases in assets. That's money coming into the company. So really interested to see the developments at Schwab. Steve, a question about Schwab, ticker SCHW.

You bet. But do you think there's any regret around fees and eliminating them? No, they do make it up elsewhere. They make up a lot of volume. They make it up on volume. They make it up on volume. Exactly. Thank you.

I mean, that absolutely is the case. You know, holding on to those cash assets really matters. All right, Steve, make up or make it up on volume? I'm going with Schwab, making up on volume. All right. That's going to do it for this week's Motley Fool Money Radio Show. Appreciate Bill and Ron being here. Steve, appreciate you weighing in. I'm Dylan Lewis. Until next week, thanks for listening. We'll see you next time.