Motley Fool Hidden Gems Investing - The Great Cacao Shortage

Episode Date: October 25, 2024

Odds are this Halloween you’ll see less chocolate being handed out at houses and when you open up a candy bar.  (00:44) Ron Gross and Jason Moser discuss: - Tesla’s return to growth expectations and positive returns for investors in 2024. - How Southwest and American Airlines are trying to rally from an oversupplied air travel market, and Disney’s succession plans for moving on from Bob Iger.  - Earnings from UPS and Coke, and McDonald’s E.Coli issues. (19:03) Get ready for Halloween! We preview how cocoa production and the commodities market are shaping what houses will be giving out this October 31st. (35:15) Ron and Jason break down two stocks on their radar: Compass Minerals and Remitly. Visit our sponsor at www.landroverusa.com Stocks discussed: TSLA, LUV, AAL, DIS, UPS, KO, MCD, HSY, CMP, RELY Host: Dylan Lewis Guests: Jason Moser, Ron Gross Engineers: Rick Engdahl  Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's the Motley Fool Money radio show. I'm Dylan Lewis. Joining me over the airwaves, Motley Fool senior analysts Jason Moser and Ron Gross. Fools, great to have you both here. How are you doing, Dylan? Doing good. We got a spooky story on the commodities market, activists logging some wins, and of course, stocks on our radar.

We're going to kick off with some big money moving around in market cap this week. shares of Tesla up over 20% following earnings, giving the EV maker its best day on the market in over a decade, and bringing the company into the green for 2024. Jason, what's behind the bump? Well, yeah, obviously, it's been a tough year to this point for the company. So, this was certainly a report that I think helps get the narrative back on track, a nice recovery from the Wii robot reaction from a few weeks ago. And a fun fact, Dylan, Tesla produced their 7 millionth vehicle on October 22nd. So for you doubters out there, hey, listen, this company keeps rolling forward, as they say. So you look at the numbers. I mean,

revenue was strong just a bit over $25 billion. That was up 8%. And then you look at adjusted earnings of $0.72 per share. That was up 9% from a year ago. And for investors, I think it always bears repeating, right? We say this all the time. This is obviously a polarizing stock for many. But there's a passage in the slide, Doug, that kind of just stood out to me, and it's a good reminder. They are accelerating the world's transition to sustainable energy. And I think that's important to remember. This is a massive vision. It's one that will take many, many years to play out.

So, yes, it'll be a volatile holding, but also, yes, it's taking on a massive vision that I think generally most agrees the direction the world is headed. I think a big challenge recently for the company has been on the margin side. We've seen automotive gross margin come down fairly significantly over the past few years as price wars have escalated somewhat. That definitely took a turn positively for Tesla this quarter. Automotive gross margin was up almost 250 basis points, thanks primarily to cost optimizations. I think price wars are still ongoing there, but the company is becoming a little bit more efficient. They noted that Cybertruck achieved positive gross margin for the first time as production increased sequentially. Listen, I've ridden in one of those, and I have to admit, I don't quite

get it. I mean, I'm not sure how large that market ultimately is, but we know that Tesla has a rabid fan base, so there is some sort of a future there. I think the thing that might fly under a lot of radars, though, I was really impressed by the energy generation and storage performance. Revenue there of almost $2.4 billion. That was up 52% from a year ago, with strong gross margin expansion there as well, close to 600 basis points sequentially. So I think for Tesla, in the near term at least, some big questions. How will the timeline shake out for initiatives like CyberCab and RoboVan? Musk noted in the call, he thinks that there's 20% to 30% vehicle growth here in the coming year, 2025,

notwithstanding any negative external events. But all in all, definitely a positive quarter that got this narrative back on track. Ron, Jason just noted that 20 to 30 percent next year figure. I feel like when it comes to Musk projections, timelines, estimates, we all kind of have our own approach to modeling the probability and how realistic they are. What's yours? Well, you know, I think what makes Elon Musk, partially what makes him interesting besides his intellect, is his optimism and his forward thinking vision, which I think is unique and probably very exciting for investors in Tesla. From a modeling perspective, I think history has shown us that we need to be a little bit conservative and not take everything at face value for sure. Maybe some discounting to his projections.

Some of his hyperbolic statements are warranted if we want to build in some conservatism to our models when we look at what this company could eventually be worth. All right. We're going to keep with the earnings focus. We have some fresh numbers out from some of the major airlines, Southwest and American. in. Ron, where do you want to start with those? You know, Dylan, investing in airlines has historically been pretty tough to get right. Just ask Mr. Buffett, who points it to airlines as one of his bigger mistakes throughout his career. And I don't think current times are really an exception. Where we are now is following the post-COVID recovery that quickly came back down

to earth. The recovery was nice, but it quickly came down to earth. Airlines found themselves with an oversupply of empty seats over the summer that really forced many to cut ticket prices, cut back on unprofitable routes. And we saw that show up in results. Now, it looks like they've largely worked through a lot of that and the industry is now in a better position to increase prices and that should impact margins in a favorable way.

I think growing optimism about the U.S. economy, the broadening market rally, that's contributed to the strength of the group. At the same time, we've seen oil prices come down, especially over the last month. That's obviously one of the most significant costs that the airlines have to deal with. So since August, stock prices have really rebounded nicely across the board. I'll point out some of that when we look at two specific airlines that reported this week. American Airlines first, a third quarter loss, but they did raise their profit guidance for the year.

as management said, the company's sales strategy shift earlier this year to win back corporate clients is paying off. Now, in May, they fired their chief commercial officer after a new sales strategy really failed. They're now trying to win back corporate clients that they abandoned to a certain extent. So they're working through that. For the full year, the airline expects as much as just $1.60 a share in profits. That's up from $1.30 previously. Stock is up 35% since August, but it is still down 10% on the year. That gives you a little context. If we look at Southwest, their third quarter profit fell from a year ago, but that actually beat estimates because there's a lot of pessimism out there in the sector. They've also had to fend off the activist investor

Elliott Investment Management during the last several months. They forecast unit revenue for the fourth quarter would increase three and a half to five and a half percent on a four percent drop in capacity compared with a year ago. It said costs, excluding fuel, would likely rise by as much as 13%. So they have some work to do there in terms of costs. But they did increase revenue about 5% during the third quarter. And adjusted earnings were $89 million. Sounds low, but analysts were actually forecasting break-even. So better than expected for Southwest. And that stock is up 15% since August. Maybe even more important than some of the earnings results that we got from Southwest. You brought up the activist investor, Elliott Management. This has been a

really long back and forth, and a very public one. They seem to have reached a resolution there. The airline will have six new directors, including five nominated by Elliott Management. Elliott has been lobbying for eight seats, was planning to call a special shareholder meeting to make that happen. They'll also be pushing out the executive chairman, Gary Kelly, former Southwest CEO. He's going to leave his role a little bit earlier than originally planned. Ron, you know the world of activists a little bit better than I do here. What do you think of the trade and the bargaining here? As a former activist, I know these things are hard to get done, and it's always a very big negotiation. You actually do want to come

to an agreement rather than go through a proxy contest if you can ever do so. Here it looks like they did. They really wanted the CEO out, so it looks like they gave in there, but they have such pretty strong board representation as a result of the deal. I think they're probably happy with that. Elliott knows what it's doing. It's Paul Singer's firm. They've been around forever, managed more than $50 billion. They've done deal after deal after deal, and pretty well. Their track record is pretty good. A couple of things they really wanted to see was getting rid of that open seat boarding process and moving to a more traditional assigned seating system. They wanted premium seating options where the prices could be a little bit higher for certain passengers.

And it seems like they're going to get a lot of what they want. They still own 10% of Southwest, I believe. So it's to their best interest for this company to turn the corner and start to see things improve. We also got a little bit of an update at the leadership picture at Disney, the House of Mouse out this week with an official timeline for its succession planning. Jason, we've been looking for clarity here for quite some time. Finally have it. What do you think of the plan? Do we really finally have it?

I mean, I feel like we have to preface these segments with, like, stop me if you've heard this one before, right? You know, all kidding aside, I mean, this is, I think, encouraging news, at least for Disney investors, that we've got a little bit more of an idea of where this may be headed. um we we saw the the the succession committee recently interviewing um espn chairman jimmy pataro uh the experiences chairman josh damaro and then entertainment co-chairman dana walden and alec bergman is all potential successors and i think we'll we'll see more names uh thrown in the hat here before it's all said and done but like i said they've interviewed with a succession committee and the plan is to have that successor installed by early 2026. That's still

kind of a long ways away. And this is encouraging. I mean, obviously, Disney has an Iger problem. They need to be able to move on from Bob Iger. And so that's a good thing, of course. But to me, when I see this news, when I see these names and their positions within the company, to me, it raises the bigger question, and I think it's worth deliberating at least. Is Disney's ideal successor really an internal candidate, or would the company benefit more from an external fresh set of eyes to help lead the company forward? I mean, we've seen companies like Wells Fargo that ultimately went external. Starbucks, of course, obviously just went external. So I'm not entirely convinced that an internal hire is the solution. Maybe it is. Maybe it works out well. But to me,

I'd love to see at least some external candidates come to the service before this decision is ultimately made. I feel like Disney shareholders have had to be pretty patient for the last decade or so. The returns have not been great since 2014. Going to have to continue to be patient. We're not going to see the successor for a while. Are you guys willing to be patient with the stock, Ron? Yeah, my kids have owned this stock for probably more than 20 years. And for them, it's been a pretty good investment. I bought some during the pandemic, time the dividend was cut before and after that, when the stock was so depressed and I thought it represented a good value. It has not been a good investment so far, two to four years later, depending on which

piece we're talking about when I purchased. I'm hanging in there. I think it's one of the most iconic brands in the world that I think it's nice to have a position here. All right, coming up after the break, we've got a glimpse at how boxes are moving around the economy and what's going on with soft drinks. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis here on air with Jason Moser and Ron Gross. We're going to keep the earnings parade rolling. We talked about Tesla returning to growth last segment. They are not the only one. UPS giving its quarterly update this week. And for the first time in two years, Jason, showing growth on the top

and bottom line. Yeah, well, UPS brought my chewy delivery yesterday, so you should not hear my dogs barking today. So, that's good. But it's been a tough year for the stock. Shares down a bit over 10% with the S&P obviously outperforming that considerably. But this was an encouraging report. CEO Carol Tomei noted on the call that last earnings call, they had said the second quarter would not only be the bottom, but it would be a turning point and they would return to revenue and profit growth. And lo and behold, here we are. They saw consolidated revenue of $22.2 billion. That was up 5.6% from a year ago. Adjusted operating profit was $2 billion. That was up 22.8% from a year ago.

And then adjusted EPS of $1.76. That was up 12.1% from a year ago. So encouraging there. And a lot of that was attributable to a 6.5% increase in daily volume. I mean, UPS isn't the most difficult business to understand. We kind of know what they do, getting stuff from point A to point B. But I think they made a neat little acquisition of a company called Frigo recently, Frigo Trans. And that's aimed at ultimately enhancing the company's ability to provide end-to-end temperature-controlled logistics solutions across Europe for the healthcare sector. And this is ultimately where think pharmaceuticals. And this matters because 80% of pharmaceuticals in Europe require temperature-controlled

transportation. So I think that's a neat little addition to the business. They've raised guidance a little bit, expecting revenue for the year of just over $91 billion and a little more operating margin expansion there as well. Hey, I mean, listen, dividend yield of 5% now, payout ratios 95%. Keep an eye on that, but they've got the balance sheet to take care of that. And more importantly, I think it's a very predictable and reliable business, because it seems like we're only having more and more things delivered to our houses on a daily basis. Yeah, and I feel like the market, overall, probably has to be pretty happy to see that guidance increase with the holiday quarter coming up soon.

Yeah, well, as a shareholder, I was really happy to see it too, Dylan. We had kind of a sign-of-the-times type quarter for consumers when we were looking at results from Coke. Demand isn't strong, and the gains are on pricing, Ron. Demand's not strong, but my 94-year-old father drinks two to three cans of Coke a day. So him and Mr. Buffett are doing their part. I mean, maybe there's health benefits. You never know. But yeah, this quarter was interesting. The results were better than expected. That was due to higher prices that offset weak demand. And consumers are feeling some fatigue here over higher prices, and that hit the stock a little bit. Organic revenue, which strips out acquisitions,

divestitures, currency, that was up 9%. That's a pretty good number. That was due to 10% growth in price and mix and a 2% decline in concentrate sales. Roughly four of the 10% price increase comes from markets experiencing really high inflation like Argentina. The rest were results of price hikes. Unit case volume fell 1% in the quarter, a quarter driven by weakening demand in some international markets. CEOs said a set of consumers are, quote, exhibiting value-seeking behavior. So that speaks to the fatigue that's, we're seeing it in fast food restaurants as well, a bit of fatigue over higher prices. Case unit volume in North America was flat for the quarter, shrinking demand for water, sports, coffee. Interestingly, Fairlife Milk, Topo Chico

were performing well despite those higher prices. Unicase volume fell 2% in the Europe, Middle East, and Africa-Asian regions, so not great there. But all in all, adjusted earnings were up 8%. Management said they see them heading towards a more normalized level of pricing going into next year that tracks similar rates as inflation or the CPI is what they mentioned specifically. So perhaps a slowdown in their ability to exhibit pricing power. One reason Warren Buffett has liked Coke for so long. All right, we're going to stick with food and beverage here and talk McDonald's to bring us home. Shares down as much as 9% this week as the market processed an unappetizing headline. E. coli outbreak linked to McDonald's quarter

pounders that comes from the U.S. government. Jason, so far, 75 people have been sickened by the outbreak. One person, unfortunately, died. Seems to be tied to elements of the company's supply chain. We are seeing some of the troubleshooting going on. But what is your immediate take looking at this? Yeah, I mean, it's an unfortunate situation, of course. To me, when it comes to restaurants, this is just a matter of when, not if. It's just the nature of the business. I think the question really is, because you You mentioned the reaction to the stock in the aftermath of that release there, but it really gained a lot of that back. So, why is this not a bigger reaction to the downside?

I think there are a few reasons. No. 1, you look at the scale of McDonald's, it's a huge company. There's still a lot that we don't know. So, we don't know the ripple effects there. But like you mentioned, 75 people at this point, 13 states. The CDC has come out and said the risk of the public is still very low. And I looked at this and kind of compared it to Chipotle. You remember when Chipotle was going through all of their issues? And that was, I think, back in 2015. That was 2015 to 2018. So it was a long stretch there. At that point, I mean, Chipotle was a $22 billion market cap when that happened. I mean, today it's $82 billion. But today, McDonald's is a $212 billion company. So I think that clearly we'll see more information

come out as this sort of progresses, and hopefully there are no more illnesses and hopefully no more deaths as well. But it's just an unfortunate part of this industry. Yeah, this feels like particularly bad timing for McDonald's. We've been talking about how foot traffic has been suffering. We've been talking about the value-oriented consumer. They're trying to get people in the doors. Hopefully, this is something that is quickly resolved. We will see you following All right, up next, we check in on one of the most important ingredients for Halloween and why it's a bit more expensive this year. Stay right here.

You're listening to Mountain Full Money. Insurance operations today are fragmented, and policyholders expect more. That's why leading insurers run on Addian. From premium collection to claims payout, Addian supports the entire insurance value chain, giving insurers full control over how money moves. A single platform to reduce fragmentation, complexity, and risk. Drive revenue, control claims cost, and power your next move with Addian. Learn more at addian.com. Welcome back to Motley Fool Money. I'm Dylan Lewis, joined by Jason Moser and Ron Gross.

Halloween's next week, so we thought we'd give investors and trick-or-treaters a little preview on what to expect when you're going door-to-door. Jason, for the folks that are going to be dishing out candy this year, if you are looking for chocolate, it might be a bit more expensive or a bit smaller than it's been in past years. It may be. I love timely topics, Dylan. I think this is just perfect for this week, obviously, with Halloween just around the corner. It got me thinking like do you remember the last time you went trick-or-treating like i mean obviously it wasn't recently i'm assuming it wasn't recently but like at what age cooler and toe i think i think the cutoff is somewhere around 12 or 13 is it because i will tell you i i'm

seeing like high school seniors coming by our house sometimes and i'm just thinking wait a minute guys girls you don't you have something else to do uh but i i get it i guess free candy in a trustworthy neighborhood. We're going to always treat them right no matter what. But yeah, this is clearly a little bit of a different season. Cocoa prices, nobody's going to really think about this, but this is our job. This is what we do.

We're kind of nerds. Cocoa prices have actually more than doubled since the start of the year. They remain at record highs based on Wells Fargo data. And according to the International Cocoa Organization, And yes, there is such a thing. They projected in August that global cocoa production this season would fall by 14.2 percent. And so I think on the one hand, obviously, we're talking about Halloween, but I think on the other hand, too, this extends well beyond just Halloween. I mean, this is this is all sorts of uses for cocoa. Right. And so this is going to impact folks beyond just candy.

But I think, you know, an interesting thing in regard to cocoa, it's not sort of your normal agricultural crop, right? You can't just grow it wherever. It takes specific regions, temperatures to grow. And we've seen areas in West Africa really is where it flourishes. And in West Africa, a place like the Ivory Coast in Ghana, that supplies over 70 percent of the world's cocoa today. And adverse weather, more than anything, temperature has really impacted the yield in those regions. And that's not going to end anytime soon. The projections actually are that cocoa prices are going to remain high until at least September 2025.

So it looks like this still has some legs. This is a story that I think we first kind of got wind of a couple months ago, thanks to our colleague, Matty Argersinger, because he's been following Hershey's and looking at what's been going on with their business. We have seen this pop up as we've looked at Hershey's comments and also some comments from other players in the industry like Mars. Ron, I'm going to read a quote out to you here from Michelle Buck. We have experienced historic cocoa prices for some period of time now. Our approach on the pricing has been to take a measured approach.

We've absorbed a lot of inflation already, but we do believe we need to pass some of it on. and we're seeing the category hold up fairly well in this tougher environment. We think it's historically rational, and it will continue to be. Help me translate that comment from the president of Hershey's. I think what she's saying is that higher prices are coming. I've seen quotes that say not this Halloween necessarily. Well, I've bought two bags of Halloween candy already, Ron. I begged to differ.

That stuff is not cheap. Maybe it wasn't Hershey product. Maybe it was Mars. Trust me. There's some Hershey stuff in there. But if prices were to remain this way, they, of course, would have to be passed on to the consumer. They already have been to a certain extent. They obviously don't want to go too crazy at this time of year.

This is their bread and butter, so to speak, time of year where they do most of their sales. So they want to be measured, but they also have a business to run, and margins are going to continue to get smacked around. Uh, Hershey's, um, in August reported an operating profit of $287 million, but that was a decrease of 49% from the previous year, um, with margins getting whacked around, um, exacerbating the agricultural situation here. And I don't think Jason mentioned black pod, which is a fungal disease that affects cocoa trees and reduces yields. I don't want any black pod in my, you know, almond joy.

Hold the black pod, please. And I know it's actually not funny. There's people that rely on this crop for their livelihood. But exacerbating this problem is speculation. And you have people that speculate on all types of commodities. They take advantage of shocks to the system, in this case, an agricultural shock. Hedge funds jump in. speculate, makes prices even higher. They're betting that things will go higher. That creates

a self-fulfilling prophecy to some extent. They continue to go higher. It exacerbates the problem and makes everything worse. And that's some of what we're seeing here as well. We're having a little bit of fun with this, but I do think it is kind of interesting to check in on commodities and be able to talk about it because we almost never do it on the show. It doesn't really fall into our lane as investors, Jason. But Coco is not really alone in experiencing some big spikes this year. We have seen some other produce products, notably oranges, up dramatically this year. This is a very real thing that winds up flowing into the input costs for a lot of the companies that we follow.

It really is. I really think it was interesting how Ron referenced the bread and butter. Whereas, I would have said, Dylan, the chocolate and peanut butter. I was trying to think very quickly, but this is live. I couldn't think quickly enough. Yeah, I'm glad you brought that up. Oranges, obviously, we saw with Hurricanes Helene and Milton, Florida has suffered severe damage here recently. And obviously, our hearts go out to everyone involved. I mean, not just in regard to oranges. I mean, cocoa as well.

I mean, this is the nature of the risk with commodities, right? You're subject to things that are just out of our control. And I think it was putting some numbers around it in regard to Hershey, for example, right? They're able to pass along some pricing, right? They're able to raise prices a little bit, and we've seen prices go up virtually across the board whenever we go shopping. They're guiding for a 200 basis point gross margin decline this year, and a lot of that has to do with some of the costs involved with the business. Now, I think one thing to keep in mind there, too, though, when it comes to commodities, and particularly businesses that are so reliant on those input costs, it does ebb and flow, right? I mean, these companies, they lock in pricing for commodities like cocoa, for example, oftentimes well in advance, and that can be good.

And so while we're seeing some headwinds now, it's also reasonable to assume that as prices abate, they will start to see some tailwinds further down the road. And Hershey is projecting for that, but it is going to take a while. But this ultimately is one of those things where it does ultimately flow through the business to the consumer. I mean, it results in higher prices, and a lot of that just has to do with less supply, right? limited supply. It's just Econ 101. A word that we've heard a lot here over the last few years is shrinkflation. Consumers might see smaller chocolate bars, for example, in different flavors, more non-chocolate treats. Hey, page in candy corn. I know candy corn is a very touchy subject for a lot of people. I don't know. I've always felt kind of like,

I can take it or leave it, I guess. But if I'm going to a party and I walk in the front door and I see a bowl of candy corn, I'm going to grab a few. You're sticking your mitts right in that bowl. I'm going to grab a few. I mean, why not? I mean, it's festive. It's fun. You want to be the first one to get to the candy corn bowl.

You don't want to be the sixth or the eighth person. That's a point. I feel a lot better if there's a spoon in that candy corn bowl, right? A serving spoon. That makes it a little bit more palatable. But definitely, we're seeing companies relying on more things beyond just chocolate this year for those Halloween bags. And I've seen this personally, right? Like I said, we bought a few bags of candy to make sure we're prepared for the trick-or-treaters that come by.

And I saw it this year. I was kind of surprised because I haven't seen it in years past. But we saw these bags with a lot more things like your fruit-flavored candies, the gummy treats like Skittles gummies, Lifesaver gummies. I mean, obviously, you've got things like Nerds and Sweet Tarts and whatnot. So I think you'll see companies relying a little bit more on that kind of stuff. Laffy Taffy. Oh, banana Laffy Taffy. Delicious and funny at the same time.

To your point, Jason, I can put some numbers to that. Research firm Cercana saying that there's not as much candy being stocked on shelves that involves chocolate, and they are seeing a double-digit increase in non-chocolate items on the shelf this holiday season. So, not only is this something that is affecting the candy companies, it's affecting some of the decisions that retailers are making with what actually goes on the shelf. You mentioned that there is a natural ebb and flow to the commodities markets. for the record, not everything has gotten more expensive this year. We've seen things like

soybeans, like corn, like cotton, all down year to date. Ron, I'm curious, have you ever invested in commodities? Has that ever been something that's been interesting to you? I don't believe I've directly invested in commodities, but I've done it through companies that are really reliant on commodities. In fact, I've only done it once or twice, and they both have been here at The Fool where I recommended both a zinc company and a steel company. And they both went horribly wrong. In fact, the zinc company called Horsehead Holdings actually filed for bankruptcy. And what I learned is that it's a very difficult thing to invest in. It is 100% cyclical, maybe not literally 100%, but it is a cyclical business. You have to be

very careful about a company's balance sheet. They have to be able to weather any storm that comes up, even if it's a long cyclical downturn. In Horsehead Holdings' case, they had a huge capital expenditure program in place at the same time that zinc prices plummeted. They couldn't make it work. The balance sheet became illiquid and they had to file for bankruptcy. So the balance sheet has to be rock solid so you can wait out cycles. You have to have a stomach for waiting out cycles. The cyclical companies often look cheap. They look cheap for a reason. I think there are plenty of other great ways to buy and hold and own stocks. Commodities might not be one of them. They're very tricky to get right. Ron, wouldn't you say, don't you think, I mean,

commodities investing to me, it seems like it would be more, just more short term in nature, right? I think for investors who are interested in that, you got to be kind of ready to move fast, right? You can't just kind of set it and forget it. I think it's buy low, sell high, get out. But doing that can be tricky because if you think something's going to turn in a month, three months, six months, and it doesn't turn for a year or two years, it obviously impacts your rate of return, impacts the opportunity cost for that capital. So I agree with you that it's probably more a trading type of investment than it is a long-term buy and hold investment. Yeah, I was going to say it's a bit of a flip from how we traditionally look at investing here at The Fool where we're long-term buy and hold. I mean we are often looking specifically for businesses that have competitive advantages, one, which is something that commodities don't necessarily have, but also businesses that are going to do fairly well during the normal times and survive the major shocks that an economy will throw where it feels like commodities you are looking to weather most of the time and then capitalize on those short-term shocks as they show up, Jason. Yeah. I'm not much of a commodities investor. I can't recall ever making beyond my spice cabinet

here at home. I mean, I don't know that I've ever actually made direct investments in commodities. And so, thankfully, I'm just investing in my, I got to get my obligatory plug in here, Dylan McCormick, right? I mean, I'm invested in the company, so I feel very good about buying all of those herbs and spices because, you know, I know I'm kind of paying myself in that regard. But yeah, it's just always struck me as just a very difficult thing to do, right? I mean, I've said it often. I mean, investing is kind of as easy or as difficult as you want to make it. And I mean, you can be successful either way. To me, commodities investing just always struck me as being a very difficult way to do it. And honestly, you need access to a lot of

information. I think scale matters here. And then you always have to remember, I mean, there are just so many things that are out of our control, those sort of wild cards that can come into play that you would never really predict. I think investing in commodity-based companies is a trap that value investors fall into maybe more than others, because you do your screens and you uncover something that's trading at 10 times earnings, and it piques your interest. And you're like, Oh, this is a pretty good company. There's nothing wrong with this company. Management team looks solid. Products look solid. Sure, it's a commodity. And sure, it's cyclical. But at 10 times, I'm being compensated to wait out the cycle. And then it goes very badly. And it turns into a value trap rather than a value investment. So I would warn investors to be very, very careful when they get enamored by a low P.E. or something that looks cheap. Keep an eye on that balance sheet and make sure that they can withstand the cycle.

All right. I got my wish. We got to have a solid 10 minute breakdown on commodities for the year. This is it. That's the one time we're going to do it. I'm going to bring us back to the fun stuff. We are approaching Halloween. As I mentioned, I'm going to throw a hypothetical at you guys. What is the desert island candy for you? You have one candy for the rest of your life that you get to eat. Jason, what is it? I love Halloween, Dylan. My girls are at college now, so they've moved out.

We still decorated ours. Well, I did. The girls helped when they were back for fall break. I thought about this one long and hard. I think Reese's peanut butter cups are a strong option, but you know where I'm going? I'm going Whatchamacallit because Whatchamacallit has got it all. Wow. I was not expecting a Whatchamacallit.

I don't even think I've had a Whatchamacallit in the last decade, Jason. Oh, man. It's just a great option. Ron, what about you? I'm going candy, Dylan, not chocolate. And I'm specifically going Runts. Banana Runts, Cherry Runts. They are delicious.

Probably not good for the teeth, but they are delicious. None of this stuff is good for our teeth, Ron. The gross household not feeling the pinch of higher commodity prices, focusing more on that candy, it seems. For folks that are out trick-or-treating, might see a couple fewer of those king-size candy bars this year. We're going to keep the recommendations and ideas coming with Radar Stocks in a moment.

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. I'm Dylan Lewis, joined again by Jason Moser and Ron Gross, and we are jumping right into radar stocks this week. Our man behind the glass, Rick Engdahl, is going to hit you with a question.

Ron, you're up first. What are you looking at this week? I'm going to take another look at Compass Minerals, CMP. They've been around since the 1800s, leading producer of salt for highway de-icing. Rock salt is the most common substance used for winter road maintenance. Now, things have not been good for Compass lately. Demand for the company's core road salt has been depressed by one of the mildest winters in more than 25 years. New CEO has positioned the company to play defense, eliminating the dividend. That will save them about $25 million in cash per year.

headcount reductions coming, temporary layoffs at one of their salt mines, right-sizing inventory, taking some steps to right the ship. But it's not going to be easy. The shares did rise recently after they released preliminary third quarter results that were not as bad as the market feared. So I'm going to dig in a little bit. They're restating some results. I want to see what impacts that have as well. And I need to think about climate change and if this is maybe something to really be concerned about. Rick, a question about Compass Minerals, ticker CMP. A question about salt.

Have they tried like the Himalayan pink salt on the roads? Does that work any better? Because, you know, it used to be just one thing. You go to the store, you buy salt. Now it's just like it's a hard decision every time. I think that's mostly for cooking. I think it'd be too expensive for the roads. There's a very popular college dorm room market they could enter with those salt lamps as well.

It's an opportunity. It's a growth zone for them if they're interested. Jason, what's on your radar this week? Yeah, I had lunch this week with a friend of mine. And he's up in New York City, manages a fund, Mario Sibeli. And he got this back on my radar, Remitly, ticker R-E-L-Y. It's a company we talked about before. It's basically the same thesis as a company I've talked about many years ago called Zoom, X-O-O-M.

But they provide outbound remittance services from the U.S. to over 170 countries around the world. And they earn their revenue from transaction fees and the foreign exchange spreads that come with that. So you look at the metrics that matter. talking about growth, sending volume, transactions, active customers, new customers. In the most recent quarter, active customers grew 36%. Send volume was up 36% as well. The two co-founders own about 5% of the company today. Still growing revenues, strong growth there, 45% annually over the last three years.

So one I'm keeping an eye on, learning a little bit more about. Rick, a question about Remitly, ticker R-E-L-Y. I think in order to learn more, Jason, you really need to use the product. So, if you're interested, I'm willing to receive, be on the receiving end of your financial transfers. I'm here to help. Message received. I'm here to help.

Message received. Rick runs a pay-to-play radar stock segment. Which ones are going on your watch list this week, Rick? You know, for some reason I'm just feeling salty today. Alright. There we go. Compass Minerals is the winner. Alright, Ron Gross, Jason Moser, thanks for being here and bringing your radar stocks.

As always, appreciate you weighing in. That's going to do it for this week's Monthly Money Radio Show. The show is mixed by Rick Engdahl. I'm Dylan Lewis. Thanks for listening. We will see you next time.