Motley Fool Hidden Gems Investing - The Man Who Revolutionized Investing

Episode Date: January 18, 2019

  Netflix rises on a price hike but slips on earnings. Atlassian hits a new high. UnitedHealth reports healthy earnings. Lululemon hits its stride. And Tesla makes a big cut. Analysts Andy Cross, Ron Gross, and Jason Moser discuss those stories, dig into the latest from American Express and Tiffany, and celebrate the life of Vanguard founder John Bogle. Plus, Reuters transportation writer Paul Lienert talks cars, trucks, and “big-ass” crossovers.  Thanks to LinkedIn for supporting The Motley Fool. Go to linkedin.com/fool and get $50 off your first job post.   Learn more about your ad choices. Visit megaphone.fm/adchoices

Thanks to LinkedIn for supporting this week's Motley Fool Money. Find the right people for your business this year at linkedin.com slash fool and get $50, $50 off your first job post. That's linkedin.com slash fool. Terms and conditions apply. 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 Chris Hill. And joining me in studio this week, senior analysts Jason Moser, Andy Cross, and Ron Gross. Good to see you, as always, gentlemen. Hey, Chris. We've got the latest headlines from Wall Street. We'll get a report from the auto show in Detroit. And as always, we'll give you an inside look at the stocks on our radar. Later in the show, we're going to reflect on the life and legacy of John Bogle,

the founder of Vanguard, who passed away this week. But we will start with the business headlines. and first up is Tesla. Shares of Tesla falling around 10% on Friday after the company announced it is cutting its full-time workforce by 7%. CEO Elon Musk said the company needs to lower costs while also increasing production on the Model 3. Jason, 2019, not off to a great start for Tesla. No. And I mean, if you remember, SpaceX, too, is going to be cutting jobs as well. And I mean, it does stink for people losing their jobs. I mean, from a business perspective, this is a good thing, which is why I kind of thought the stock would be up on the news. I mean, it's always a

coin flip, really. But the market is, you know, selling the stock off on this news, which is a little interesting, I guess. But when it comes to Tesla, I mean, it is about figuring out ways to cut costs, ramp up production. And ultimately, you know, this goes back to just coming up with cars that people not only want, but that people can afford. And it goes back to this debate I think we've been having probably the last five years around these hallways as to whether Tesla actually has pricing power or not. And it always struck me that they didn't. I mean, the cars were essentially built, they're very expensive, you have to offset some of that cost with tax credits and whatnot. And then to attract a bigger audience, they typically are not going

to be paying up for premium automobiles. But I mean, in Musk's own words here in the email he sent, and I'll quote this, he said, the need for a lower priced variants of Model 3 becomes even greater on July 1st when the U.S. tax credit again drops in half, making our car $1,875 more expensive and again at the end of the year when it goes away entirely. So, does Tesla have pricing power? I would say no. I think they're making the right call here in figuring out ways to whittle down costs, because they are, I believe, stepping into a very challenging period ahead. Just building on that silver lining, Jason, what Elon said in his email, which caught me, was that we are reducing headcount by 7%, we grew by 30% last year, which is more

than we can support. So, here's the thing we've been looking forward to from Elon Musk, which is to show that he can run this company as a CEO, as a real car company. I saw that in that letter, and that's what impressed me and gave me encouragement for Tesla shareholders and customers going forward. I agree with that totally. He looks like a guy who is ready to run this business, not just offer up big old grandiose visions. They're going to report earnings on February 5th, and he was pretty clear last year that when they reported a profit, that we're going to be profitable every quarter. What do you think? I tend to like to under-promise

and over-deliver, so I might have done it a little bit differently, but I guess time will tell. He's one of those CEOs that will get it done, no matter whether they have to work double time, cut costs, whatever they have to do on either the top line or the expenses. If he said it, he's going to try to get it done. Fourth quarter subscribers for Netflix came in lower than the company had predicted. Still, shares of Netflix up this week, thanks in no small part to the price increase the company announced two days before they released the earnings, Amy. I think it was an impressive quarter, continuing to build on as they are building this behemoth

of a media company with 139 million global subscribers, 58.5 million in the U.S., 80.8 million internationally. Growth was up 30%. They continue to see they need to make the investments as they are building out the platform that they can serve. They offered up a lot of interesting content stats chris which i found very interesting analysts have been looking forward to this so the one that i found the most interesting is that they now have about 10 in the u.s about 10 of screen time tv screen time per day that's about 100 million viewing hours in the u.s per day on netflix which when you think about the volume of content they have the ability to show that to those subscribers continues to impress me. However, it is expensive, and the free cash

flow line continues to be negative. You look at the subscriber number, Ron, I mean, yes, they came in a little bit lower than they had guided. They still came in close to nine million. The growth, obviously, is impressive. And playing the expectations game with that, you're going to be ahead or behind in any given quarter. But very, very impressive. But speaking of pricing power, getting back to that, it clearly seems that Netflix does have pricing power. Now, that doesn't extend into perpetuity. At some point, they're going to raise prices, and it'll tip the scales to where some people will say, that's too much for me. I'm not actually utilizing Netflix. I'm not enjoying the content enough to pay

the price that they're charging. But it doesn't seem that that will be anytime soon. Can I just go back to that stat that I said? So, it's 100 million hours video per day. That's about 1.7 hours per day per membership in the U.S. That's about 51 hours per month. The average price for Netflix subscriptions is about $10. That's like $0.20 an hour that we're paying to use Netflix. So, when I think about the ability for them to keep raising prices as they need to deliver this content, I do see room for them to grow in that regard.

Well, and we talk about Netflix in the competitive landscape going up against the likes of Disney, Hulu, etc. I thought it was pretty smart of Reed Hastings to talk about the competitive landscape, not just in terms of those companies, but also broadening it to talk about things like YouTube and Fortnite, because certainly for younger people, that's taking some of their attention as well. I think that's the key, really, is understanding that they are in the entertainment industry, it's not just streaming video. And Fortnite is a good comparison there. And just to go back to the price increases for a second, because I do feel like Netflix has earned that right to boost prices incrementally. And they're going to be able to do that, I

for a little while longer. The question for me is, how far can they go? If you just look at the math here and say, Netflix raises prices by $10 a month. If they raise prices by $10 a month on all U.S. subs today, that gives them basically an additional $7 billion in revenue per year. But the problem is that money has already been spent, and they're going to have to keep on doing that. I think that part of the downside of the binge-watching movement is, the content just lasts a much shorter lifetime, which means that you have to come out with more content. And their business model is in the line of producing a ton of it. So, it's going to be expensive to do, but they've proven very worthy of maintaining

that subscriber base. And you counter that with a company like Costco, which also appears to have some pricing power with their membership fee. But every time they raise that membership fee, it really accrues to the bottom line. It's incremental profit, because they're so profitable in the first place, because the model just works. Yeah, the argument with Netflix is eventually those price increases will trickle down to the bottom line, but it's still in theory right now. We have to kind of wait and see. And they did raise $800 million in notes and $1.1 billion in euro notes during the quarter. So, continuing to put debt on the balance sheet that they hope they can recover from down the road.

Shares of Lululemon Athletica up 10% this week after the company raised guidance for the full fiscal year. Ron, safe to assume that Lululemon had a good holiday? Good holiday. You know, I'm going to say the word athleisure, but I don't want to. But for our listeners, I'm going to say the word. I don't like the word athleisure. And you should not. I agree.

Yeah, strong holiday season, which was not the across-the-board experience from retailers. We certainly didn't see that. If this was a discounter, I would say, OK, that makes sense. But this is a fairly high-priced item here. So kudos to them. Athleisure remains hot. that. The company is doing really well. I expect to see a great report when they do actually report earnings. If you recall, back in the last quarter, comp sales were up 17%

on a 44% increase in direct-to-customer business. So, the company continues to really execute well. Stock's up almost 100% over the last year. Tiffany's share is also up this week. Help me out, guys, because I'm not really sure why they're up this week. Same-store sales during the holidays, down 2%. They came out with guidance for the full fiscal year that they said is going to be at the lower end of the range? Now, this makes more sense. You have a high-end retailer that had a soft holiday season. Chinese tourist spending globally less hurt them. Soft demand in the U.S. and Europe hurt them. Worldwide, same-store sales were down 2%. So, not surprising. I would

have kind of expected to see a report like this. Why the stock is up, I can't really explained because they cut profit guidance, which obviously usually means the stock is going to trade down. It's at 19X earnings, so it's not real expensive. So, people aren't, I guess, maybe selling it off on value, and maybe it just was stable enough. I think there's a consistency also with Tiffany. They've proven over long periods of time that they don't chase those dollars, they don't resort to those fire sales to move inventory. So, you kind of know what you're getting with them from a retail perspective, which is pretty valuable if you're looking for one of those buy-to-hold style investments.

Coming up, more earnings and a few stocks on our radar. Stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Andy Cross, and Ron Gross. Shares of UnitedHealth Group up 7% this week after reporting strong profits in the fourth quarter. Jason, UnitedHealth is a $250 billion behemoth, and it's only getting behemother.

Yeah. I love the use of that word there. I'm going to take that one home this weekend. And you keyed in, really, on my first observation. This company is just so impressive in its scale. And that scale is such a tremendous advantage in relation to their core business, which is essentially writing healthcare policies for the country and really a lot of markets around the world now. Full-year revenue is up 12%, $226 billion they brought in on the top line. The medical care ratio for the year was 81.6%, down slightly, and that's a good thing. And they typically keep in that 81% to 82% range. An interesting thing on the call I noted, this quarter, you're hearing them talk more and more about using digital channels, which is just

code for telemedicine these days. And that word, this quarter was mentioned seven times on the call. You go back two years, never even mentioned the word once on the call. So, they're talking even more and more about that stuff. And you'll see some advertisements on TV as well. So, I think there was a lot of buy-in to that market. And you may remember that UnitedHealth Group is a component of my healthcare and wealth care basket of stocks. Closing in on one year, and man, these guys have a performance Bill Belichick would be proud of, because it just keeps on doing its job. It's up 17.6% for the year versus the market's 0.6%. Over 10 years, it's up 900% versus 250% for the market.

Wow, that's just an impressive business. Atlassian is not a household name, but maybe it should be. Second quarter results for the software company were good enough to send shares of Atlassian to an all-time high on Friday. Yeah, Atlassian makes collaborative software for companies. We use them here, their Trello solution. EPS of $0.25 versus $0.13 last year versus $0.21 for the estimates. Subscription revenue up 56%. Operating margin on an adjusted basis increased to 25% from 22%. So, things continuing to do well for Atlassian as they're growing. They passed 65,000 customers for their Jira product, which is their real core solution. So, lots of software innovation

at Atlassian and delighting customers around the globe. American Express closed out its fiscal year by more than doubling its annual profit. Shares of Amex up this week. Ron, their expenses definitely going higher. Going higher, but they have to do that to compete, because there's a lot of offerings out there when it comes to cards. So, for example, they revamped their gold card recently to include more travel and dining benefits, and there's expenses associated with that. But, it was a strong report. It was actually a little light compared to expectations, but let's just not play that game just for this moment. It was a strong report with revenue

up 8%. Sixth consecutive quarter with revenue growth of at least 8%, which is pretty solid for them. As you mentioned, on an annual basis, profits more than doubled. So, really good to see solid guidance. Stocks trading around 12X. These stocks do trade typically lower than a market multiple, so it doesn't necessarily indicate a very cheap stock, but it's certainly not expensive. There was a point in our lifetimes where this was the card to have, and it really seems like, whether it's through their own stumbles or just greatness on the part of companies like Visa and MasterCard that Amex really got lapped? I used to use it exclusively, and now I don't use it at all, because I replaced

it with something like a Southwest card, or people love hotel cards. Ron, I have an American Express that I used to use religiously, and now only occasionally because most of my behavior has gone over to the Amazon Prime card, which is working out quite nicely. Let's get to the stocks on our radar this week, and our man behind the glass, Steve Broido, is going to hit you with a question. Ron Gross, you're up first. What are you looking at this week? I'm going to go back to Union Pacific, which operates one of the two largest railway networks in the U.S. They operate west of the Mississippi, connects about two-thirds of the country by rail.

A unique competitive position as a result of their behemoth nature, for sure. They're constantly getting better, more efficient. They've got a rising dividend, aggressive share repurchase. They've paid dividends on the common stock for 119 consecutive years. Years? Years. They've been around a while. So, for those dividend investors out there, this is a good one. Solid company, and they continue to increase the dividend. What's the ticker? The ticker is UNP.

Steve, question about Union Pacific? So, it seems like gas prices continue to rise. I would imagine that helps Union Pacific. Am I right? You are right. But the strength of the economy is largely what their results are based on. So, let's keep an eye on the economy here. The downturn in the coal industry has hit the rail industry as well, but they still continue to produce pretty impressive results. Well, and another benefit, if you're investing in a railroad, pretty high barrier to entry. For sure. They're not building a lot of new ones. It's not like the four of us can just go out and start our own railroad.

Jason Moser, what are you looking at? Well, we're talking about 90% of the flavor and 10% of the cost. My favorite spice maker, McCormick, ticker MKC. Earnings are out next Thursday, January 24th. And really, I'm going to be watching to see signs that the Franks and French's acquisition is still going along nicely. All signs point to success there. I really found it interesting, last quarter, they noted that the company itself has added distribution to 20 new countries year to date, including larger markets like India. So, I want to see them tie a bow on that and really understand how much opportunity is left out there from a global perspective. I wouldn't be surprised

to actually see these guys try to pull off another acquisition at some point, because it sounds like they're getting this RV Foods one through. Steve, question about McCormick? So, McCormick seems to totally own the spice category. What do you do once you own a sector what do you do next? Well, I think you do one of the things they did in making smart acquisitions. And so, the Arby Foods acquisition, which gave them access to more of the condiment side of the flavor market. And I think that's ultimately what they're trying to do, is expand their flavor portfolio beyond just spices. So, I'd keep an eye out for potentially a new acquisition. I want a flavor portfolio. Andy Cross, what are you looking at?

NVR, the home builder that's located just up the street in Reston, Virginia, reports earnings next week's $9 billion market cap. The stock peaked at $3,600 last year. Yes, $3,600. It's now at $2,500, so down about 30%. It's the class of the homebuilders, which have really struggled as interest rates have increased. So, I'm really looking to see what they are saying about their new orders, which were up about 2% last quarter. Their average selling price went in the other direction, down 2%. Symbol is NVR. Steve, question about NVR? It seems like home prices are going down as interest rates rise and sales seem

to be decreasing. Why am I interested in this company? Well, it's because the stock is cheaper, they're the class of the industry. When you think about the returns on capital this business makes and the way they go about running it, when I look at the next five years and the stock has outperformed the industry and the market over the last five years, I expect more of the same. A homebuilder, a spice maker, a railroad. What do you want to add to your watch list, Steve? I like that dividend. I'm going with Ron, Union Pacific. I really thought you were going to say 119 quarters. Alright, guys, we'll see you

later in the show. Up next, we are heading to the Motor City to get an update on the state of the automotive industry. Stay right here, you're listening to Motley Fool Money. Hey, before we talk with Paul Leinart, let's talk about LinkedIn. You can set your team up for success in the new year by making that perfect hire. But where are you going to find that person? When it comes to posting your job, you want to go where you have access to an engaged community that people visit every day. LinkedIn. Most LinkedIn members are not checking job boards regularly, but nine out of 10 LinkedIn members are open to and interested in new opportunities

like yours. With most of the U.S. workforce on LinkedIn, posting on LinkedIn is the best way to get your job opportunity in front of more of the right people. It's no wonder that a new hire is made every eight seconds using LinkedIn. So find the right people for your business this year at linkedin.com slash fool and get $50 off your first job post. That's linkedin.com slash fool. Terms and conditions apply. Welcome back to Motley Fool Money. I'm Chris Hill. This week, Detroit is home to both the Automotive News World Congress and the North American International Auto Show. Here to help us make sense of it all is veteran journalist Paul Leinart. He covers automotive tech, innovation, strategy, and finance for Reuters. And he joins me now from the Motor

City. Paul, always good to talk to you. Same here, Chris. Thanks. What is your headline for the week? In a world of electric vehicles and automated vehicles, if you walk through the Detroit Auto show. You're going to see a lot of big trucks and big-ass crossovers. So I was looking at your Twitter feed, and I did notice you talking about the pickup trucks, the SUVs. Help me understand, because you know a whole lot more about the automotive industry than I do. What constitutes a big-ass crossover? I'm looking around at stuff with badges from Cadillac to Lincoln to Hyundai to Honda to Ford, I'm seeing vehicles that are nearly as big as trucks that have three rows of seats that can carry seven or eight passengers. And many of them are all-wheel drive or at least

have all-wheel drive capability. And they can get very expensive very quickly. So you can use your own terminology. I kind of tossed that out there to see what kind of a reaction I'd get. So if what's being featured are the trucks, the SUVs, et cetera, where are the sedans? Because it really seems like if we're just looking at automotive trends, sedans are on their way out. Well, Chris, as you know, Ford announced last year that it was killing off most of its sedans from the U.S. because demand is sliding rapidly. GM only recently announced it's going to start killing off some sedans, but you walk through the auto show, you can find them here and there.

Honda and Toyota, of course, sell two of the most popular sedans in the country, so they are there. But Lincoln, which is moving rapidly to become an all-SUV, all-crossover brand for Ford, they still have two or three sedans on their stand. So, forgive me if I got a little schizophrenic feeling walking through the show. Yeah, I'm wondering if for anyone who's thinking about buying a vehicle later this year, if they're going to all of a sudden see dramatically lower prices on sedans, that dealers are just looking to move to make room for the bigger stuff.

I would count on that, and I would count on that from many brands. So, if they're not being celebrated, they're certainly being invested in. $300 billion being invested globally in electric vehicles. Is anyone making a splash this week in Detroit? It is. Electric vehicles are normally quiet, but it's amazing to see an auto show in recent years that's quiet on electric vehicles. There was a concept on the Nissan stand, a concept on the Infiniti stand, which is a Nissan brand. And then the Chinese brought a concept. But boy, you have to look hard at the Detroit show this week to find an EV on the show floor. Why do you think that is? I mean, I understand the appeal of the larger vehicles, but with so much money being

poured into electric vehicles. Why do you think it is that there, are they just taking a year off and in 2020 we're going to see more of a splash? I have a real easy glib answer and then probably a slightly longer but more sensible answer. I don't know what it's like where you live, Chris, here in the Detroit area. Gas is around two bucks a gallon. You don't need to go much further than that to understand why people are a little reluctant to move out of their familiar internal combustion engine vehicles. The longer answer is EV charging stations are still pretty hard to find. It still takes way too long to charge an EV, and many EVs all the way up into the top of the Tesla range still cost way more than a comparable gas engine model. There have been

years past when you and I have talked where Tesla was absolutely the bell of the ball when it came to the auto show. How is Tesla being talked about, the people you're meeting with this week? How is Tesla regarded? And what are people asking about the next 12 to 24 months when it comes to Tesla? I think the big buzz right now is who's going to be out on the market within the next 12 to 24 months to challenge Tesla. And there's a lot of competition coming mainly from the Germans right now, but from some other quarters as well. So Tesla's had the game pretty much to itself for a number of years. That's about to end. Tesla's also moving into China. And that's going to be an interesting situation to watch, too, not just from a political and trade war perspective, but

to see if they're going to switch technologies, what they're going to do over there. Will the Chinese embrace Tesla's like the Americans have over here? And finally, Later this year, we're going to finally get a new look at the Model Y, the compact crossover that's coming out to join the Model 3. What is your big question about the future of electric vehicles? Because I don't know of too many people looking at the oil and gas industry predicting that prices are going to spike dramatically in 2019. They are not. Nobody is saying that. And in fact, just the opposite, that prices, oil and gas prices should be relatively stable, at least for the foreseeable future.

Now that fracking and other newer technologies have kind of given us a glut of petroleum, right? So in a nutshell, my question about EVs is who will buy them? You mentioned the Germans a moment ago. This week, Volkswagen and Ford Motor announced a global alliance to build pickup trucks, delivery vans, and more. You tell me, why are these two rivals teaming up? You know, these two companies have been doing this dance for a little while. Volkswagen, in years past, actually talked to Chrysler, oh my gosh, 30, 35 years ago, about doing a much broader tie-up. and ironically, Ford was given a chance to buy Volkswagen right after World War II and turned

that down. Right now, they have different needs. Volkswagen desperately needs to get away from the diesel scandal, so it is way out in the forefront of electrification. It's pouring like $90 billion into battery-powered vehicles. Ford is a little bit behind the curve on that, so it could probably use some of Volkswagen's expertise. And I think Volkswagen's work on automated vehicles, it hasn't stalled out, but it could probably stand to work with Ford and Ford's Argo unit, which has been doing great work on automation or at least development of automated vehicles. So there are some areas where they could participate. They could help each other in Europe. They could help each other in South America. So I think the talks will continue. Let's go back to trucks for a

second. What is the current state of the competition between Ford Motor and General Motors? Guess what? There's an interloper here that may knock Chevrolet out of the Long Hill number two position, and that's Fiat Chrysler's Ram brand. The two are squaring off at the auto show. So, there's a new Ram heavy-duty pickup and a new Chevy Silverado heavy-duty pickup, and you can price those puppies all the way up close to $100,000, I think, if you load them up with all the goodies and gadgets they offer. It was this week, five years ago, that Mary Barra took over as CEO of General Motors. She's well-respected.

She has demonstrated that the company she's running is open to innovation, trying new things. And yet, investors have not been rewarded. In five years, the stock is almost exactly down to the penny where it was when she took the job. How is Mary Barra regarded in Detroit? I'm a huge admirer of Mary Barra. I think she's widely respected and admired, not just in Detroit, but across the auto industry. She's done a lot of great things for General Motors and helped bring that company kind of back from the brink, right? I think the single biggest issue for GM, as it is for Ford

and a number of other incumbent automakers, is simply this. Wall Street, and I use that kind of to denote investors of every stripe, aren't convinced that these folks can make that leap across the chasm. to the future of transportation, whether we're talking about automated vehicles or electrified vehicles or the types of services that newer companies like Uber and Lyft offer. Everybody's working on it. They're scrambling. They're pouring money into it. Nobody's making a lot of money at it right now. And Ford and GM, in the meantime, continue to build big, profitable, very profitable pick up trucks and SUVs, and GM's pretty darn good at that. So, you know, I don't know what

it's going to take to convince Wall Street. It's amazing that a company like Tesla, that's, what, 10 years older thereabouts, and has never made a full year of profit, is actually valued by investors much higher than GM or Ford. There's a lot of action in the self-driving car space. You've got Ford and GM. You've got companies like Waymo. What should we be watching this year when it comes to self-driving vehicles? I think Waymo, which only late last year began offering a hint of a commercial service in Phoenix, is going to start to roll that out in other places so real people can actually try the service. Think of it as an automated taxi service.

They'll still be drivers in the vehicles for a little while. GM still, through its cruise subsidiary in San Francisco, wants to launch a similar service. Ford, in the meantime, decided not to go with passengers or human beings first. They're delivering goods, everything from pizzas to packages. So they're teamed up in Miami in a test down there with Postmates and Domino's Pizza. look for Ford to expand that to a few more places. So we're still in that very early testing stage where you've got to prove out the technology, but more importantly, you have to start proving out some of the services to see if these things will ever make any money. Of everything you've seen

this week, whether it's a particular type of technology or a concept car, what have you seen that really impressed you, something that you thought, ooh, I'd like to get my hands on that? Chris, please don't laugh at me. The thing that really stuck out in my mind, I don't know if I would say it impressed me, although I'd really like to have one, is the carbon fiber electric helicopter from a company called Workhorse. It's tucked away in the back of Cobo Hall, like way past the cars. But I walked over there and fell over this thing, and I almost had a heart attack. It was awesome. Now, if I can only figure out how to scare up about $200,000, we can talk business. I was going to say, instead of asking you about self-driving cars, do I need to start asking you

about the helicopter industry? Drones, my friend. Drones. Forget about e-scooters. Drones. It's the future. That and plastics. If you want to know more about the automotive industry, you need to be reading Paul Leinart's stuff. Paul, I know it's an incredibly busy week, so thanks for making the time. Always, always love talking to you, Chris. Thanks for the conversation. Baby, you can drive my car

Guess I'm gonna be a star Baby, you can drive my car And baby, I love you Beep, beep, beep, beep, yeah Coming up, a few thoughts on the life and legacy of John Bogle. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio once again with Jason Moser, Andy Cross, and Ron Gross. This week, the investing world lost a true giant. John Bogle died at the age of 89. In 1976, he founded Vanguard Group, created the first index mutual

fund and started a revolution in low-cost investing. Andy, make no mistake, every one of us, whether we were a shareholder of Vanguard's products or not, every one of us benefited. Every one of us is richer because of John Bogle. And I wrote this week that if there's ever an investing Hall of Fame, he's an automatic first ballot taker on that Hall of Fame. Just think about what he has created. Vanguard now has more than $5 trillion under assets. Most of those are invested in passive index funds to just go about to match the market in as low a cost as possible. This was revolutionary back in 1976. He was laughed at, he was derided, yet given the success and the way that he

has built that business as a mutual business, it really has had this lasting impact and his legacy will not be forgotten. We all owe a debt of gratitude to Jack Bogle. Yes, certainly beloved by the individual investor. Not so much by the active manager, however, because all of a sudden, there was a passive product that you could buy and you didn't necessarily need to rely on your active fund manager any longer. I think, as a whole, It's certainly been better for the investment community, for the world. But at the time, it was revolutionary, and not everyone was a fan. Oh, no question. There were absolutely people used to a pretty cushy fee-based lifestyle,

Jason, on Wall Street. And I'm sure some of them tried to pull him aside and say, John, why are you trying to ruin a good thing here? Yeah, well, you know, hey, everything changes eventually, right? And I mean, a lot of his investing tenets really are what helped build our Foolish investing philosophy here that we talk about every week, on and on and on. And I've seen the question posed more than once this week, is who is going to be the next Jack Bogle for the market? And I think really the point is, there's not going to be one and we don't need one. That's how profound what he did was. I mean, he's going to have people like us, organizations like

investors like us, get up there and call BS when we need to. That's the impact he's had. And I think once that cat is out of the bag, it ain't getting back in. We here at The Motley Fool had the chance to meet him a bunch of times. We had him here at Fool headquarters a number of times. We loved Bogle for his passion, his competitive fire, also for his sense of humor. I want to play a clip of Jack Bogle when he made an appearance on the original Motley Fool radio show around the turn of the century. Here's Jack Bogle playing a round of buy, sell, or hold with me and Tom Gardner. Okay, let's start with buy, sell, or hold Warren Buffett.

Buy. He's a fundamental value investor. He would diversify a portfolio of U.S. stocks because he has some high-grade stocks in there, but has also done very well over a long period of years in insurance company holdings. He's more of an insurance company than he is a U.S. stock investor now. Okay, Jack, you live in Valley Forge, Pennsylvania, in the area. Buy, sell, or hold Philly cheese steaks? Buy, hold Philly cheese steaks. What?

Okay, why are you holding? Well, I'm holding them only if you don't have heart problems, because they've got A, cheese, and B, steak. And I would say the cholesterol lovers, those that can handle it anyway, should be entitled to a good, they're delicious, but should be entitled to a good Philly cheesesteak. But I'm not putting it on buy because you might do it more than, say, once a month.

Okay, John, our final one. Buy, sell, or hold teen pop sensation Britney Spears. Well, I would sell Britney Spears. Okay, let's hear why. Well, she's a little sultry for an older girl. I mean, a little goo-goo-eyed. And, you know, I don't know. She's displaying a certain amount of virtue

that we didn't used to see. on the stage. Love that clip. Love that. Love that clip. And also, as he indicated when he was talking about cheesesteaks, I mean, pretty remarkable that Bogle had a heart transplant when he was in his mid-60s, made it another 23 years.

I mean, just, I think we all had the chance to meet him. So much energy and an absolute iron grip of a handshake. Well, and he was also, the story of when he founded Vanguard, being forced out of Wellington. I mean, it's a really great boardroom struggle that he went off and kind of backdoored his way back into creating the index fund and creating Vanguard and turning it into this amazing business. And he was a convert. He was not always a fan of passive investing. In fact, he railed against it. But kudos to him for realizing in the end that this was the way to go and it would be a great thing for individual investors.

Although his senior thesis at Princeton was about index investing. I don't know about your senior thesis. He had not that. Definitely not. All right. Ron Gross, Jason Moser, Andy Cross. Guys, thanks for being here. Thanks, Chris. On behalf of producer Matt Greer and our engineer, Steve Brodo, we're going to hand the final minute of the show over to Jack Bogle. This is from a visit he made to Fool headquarters a decade ago when he shared how he came up with the title for his book, Enough, True Measure of Money, Business, and Life. Kurt Vonnegut and Joe Heller, the author of Catch-22 of course are going to a party in Shelter Island

that lifestyles of the rich and famous and socially prominent place off Long Island in New York to a party given by a billionaire hedge fund manager and they get into the party and Kurt says Joe, see that guy over there

he's a hedge fund manager he's a billionaire and he made more money today this one day than you have made on every copy of Catch-22, probably the biggest book of the post-war generation, post-World War II generation, ever sold.

He said he's made more money than you on every book, every copy of Catch-22 that has ever been sold. And Joe Heller looked at Kurt Vonnegut and said, that's okay, because I have something he will never have. Enough. Enough. and that's where the story comes from.