Motley Fool Hidden Gems Investing - The Market’s New High Is Anything but Blah

Starting point is 00:00:00 The stock market is hitting a new all-time high and things are anything but blah in the world of investing. This is Motley Fool Money. Everybody needs money That's why they call it money The best things in life are free But you can give them to the birds and bees From Fool Global Headquarters, this is Motley Fool Money Welcome to Motley Fool Money

Starting point is 00:00:42 I'm Jon Quast, filling in for Travis Hoyum today, and I'm joined by Fool contributors Lou Whiteman and Fool analyst Asit Sharma. Guys, we're going to talk about so many things today. We're going to talk about earnings and the market being at an all-time high. But first, we really wanted to hit this big earnings result. So, earnings season is underway, and it's not a member of the Magnificent Seven, but Netflix is an honorary member, I suppose we could say the Magnificent Eight. It's really the first big, big company that's reported this earnings season. It came out yesterday with financial results for the first quarter of 2026, and the stock is down today. We have price increases during the quarter.

Starting point is 00:01:27 Growth seems to be slowing down. Co-founder Reed Hastings is stepping down from the board of directors. Guys, what stood out to you from this quarter? I'll say for me, the quarter it was a beat, but it was kind of a blah beat, right? Because a large part of that beat was this $2.8 billion termination fee they received from Warner Brothers Discovery. Look, hey, that's great. That's real money. I wouldn't turn down $2.8 billion, but probably that's not sustainable, guys. I don't want to predict your future, but we're probably not going to have a big deal termination. It was more in line other than that. And guidance, again, I think was fine. It wasn't wow. I mean, revenue is up, but it's going to grow by 13% in the current quarter

Starting point is 00:02:10 after 16% in the just completed quarter. That's not what analysts had hoped for. But hey, I hate to sneeze on 13% growth. I think Netflix is who we thought they were. And I think it's fine. Maybe it's not that high mega growth business it was a decade ago or five years ago, but it's hard to get too upset about what I saw awesome. Yeah. Lou, I had to pick apart some of the results, pulling out the big cash numbers they received from the Warner Brothers deal termination fee. Looking at the rest of the quarter, yeah, it was strong, but we've come to expect that Netflix isn't ever going to be the really vigorous growth engine it once was. Investors are slowly re-rating this business.

Starting point is 00:02:58 I still think it's going to be quite a vibrant long-term hold for those who understand the business, understand the content business, and just how entrenched it is. I thought the engagement numbers looked good. I mean, engagement hit an all-time high this quarter. And they did 70 live events in the quarter, plus gaming initiatives. So we see Netflix branching out into some new things and people are only watching more. They added a bunch of international members through Japan, through the World Baseball Classic. I thought all of that was a nice color in the types of things that Netflix needs to do to more slowly but surely grow that audience, grow the hours that people are watching. Ad revenue is something that we have often talked

Starting point is 00:03:46 about as integral to the story going forward. They're projecting that ad revenue is going to basically double in 2026 versus 2025. I think the rough number is something like $3 billion. dollars. So here we have a business which the market was disappointed in because the expectations for this year just aren't as fast and I think as fruitful as the market wants. But it's not a big re-rating. I think the stock maybe is down about 10% or was opening at that as we tape. So basically the market's like, we're going to adjust this price around the margin. Still a great story here. And there's a little bit of angst over Reed Hastings stepping down. But truth be told, it's been like this honorary seat, sort of a spiritual advisor seat for quite a while.

Starting point is 00:04:31 This doesn't change anything on the ground. And I think the lessons that he imbued his management team with over the years, they're well taken. And these folks know how to operate the business going forward. Yeah. I mean, look, I hate to be that guy, but I'm going to blame the market here, not the company. Because look, I'm not going to say the Warner Brothers discovery deal was a good idea. It looked like a huge, huge undertaking. But I think this is the smartest management team in the business. And I don't think they were just empire building or something like that. I think they were telling us something that just the path from here is harder and they needed to look at hard choices or figure out how to grow. And look,

Starting point is 00:05:12 I think what we're seeing is another way of saying it is we're a mature business now. We are not the business that we once were. So I think, Asad, I think you're exactly right. I think this is a market beater from here. I just don't think it's a market destroyer anymore. And I think the market needs to adjust to that. And maybe the shareholder base needs to turn over a bit. This is a really, really well-run, best-of-breed company. But they have conquered a lot of the worlds they can conquer. So it is going to be slow and steady. Again, I think beating the market. But just, I don't know. I think at some point, we just have to say, this isn't the Netflix of old. It's still a great business, though. Yeah. And having said that, maybe it's a

Starting point is 00:05:53 great risk reward proposition going forward because so many of its peers, you know, as John said, it's like outside the mag seven, it's just outside. Well, a lot of those businesses are fraught with risk right now with all the change going on in the world, trying to stay on top of each other in this race to build out capacity for AI. Maybe a Netflix is a sure proposition and maybe the market doesn't have this monster performance that we've seen in the past several years. Then if you get a good, I don't know, 8% to 10% to 11% to 12% return out of Netflix every year with less risk, not so bad. Works for me. I want to shift gears just slightly here. At the beginning of earnings season, we always have this very heavy information from the banks

Starting point is 00:06:36 coming out. And in this first week here of earnings season, we've already seen Goldman Sachs, Bank of America, Bank of New York Mellon, Charles Schwab, Truist, Fifth Third. And we could bore our listeners with the raw numbers, but I thought it better to talk about maybe the broad takeaways we could have at this point. Circling back to Netflix, you see that pricing that they did take during the quarter that didn't really impact the numbers. That'll play in more in the coming quarters. But I kind of look at that and I wonder, oh my goodness, is the consumer able to pay higher prices right now with so many things going on? But Lou, maybe these numbers are showing us that the consumer is okay. Yeah, I'm not the first one to say this, but bank earnings is a pretty good

Starting point is 00:07:19 window into the economy, right? You know, banks touch Main Street, they touch corporate America so much. And look, for all of our fears, and I think the worries are justified, the earnings suggest that household finances and corporate finances in aggregate are holding up surprisingly well. Now, guys, I never want to accuse anybody in a market together of collusion, but it was really weird. If you look at these calls this week, Jamie Dimon at JPMorgan Chase, Charles Scharf at Wells Fargo, Brian Moynihan at Bank of America, Jane Fraser of Citi, all in that opening quote you put just under the results in the press release, they all led with the word resilient, resilient, resilient, resilient. That is what the message that, and look, I don't think they had a

Starting point is 00:08:05 conference call beforehand and said how we're going to do it. I think that's all their messaging. And I think, look, if you look at it, there's still reason for worry. I think there's still reason to watch this space closely. We've talked about the K-shaped economy. And there are definitely households that are struggling and things are getting worse. High gas prices are out there. But at the same time, layoffs are at kind of historic lows. The unemployment rate is, in an area that in history was suggested as pretty healthy. I don't know, guys. I think resilient, holding up, I think that we got what we wanted out of the banks in terms of a barometer on the economy. Asa, do you agree with that?

Starting point is 00:08:48 I totally agree. The only quibble I have is not with what Lou said, but this adjective of resilient. I spent a career as a parent teaching my kids to be resilient. I don't want to have to listen to these CEOs telling me how their banks are resilient. Tell me about your business model. But I get where they're coming from, right, John? You have such a hard wall to climb when you're a big diversified bank. So if economic activity slows, you have to find a way to beat the market, to have your earnings show that growth. How you do it a lot of times is through trading activities. And if engagement for Netflix is the way they move the needle, with these banks, it's finding higher volumes of trading for their trading services, higher volumes

Starting point is 00:09:32 of lending, but you need economic activity for that. And you almost need a little bit of volatility in the economy. We saw Goldman, I think, do fine across its trading businesses and the investment banking business was there. But truth be told, if we didn't have so much dislocation in this economy, they would have done better. And we saw the same with Schwab. Schwab had a 34% rise in daily average trades, but probably still just disappointed investors. They wanted to see more. When the economy is pushing along, these banks tend to have more opportunities to do well. And I think it's just a difficult environment for all of them right now. But the base of it was, come back to that word that I don't like, is resilience. They were able to push through.

Starting point is 00:10:18 And I think the floor stayed in for these banks, even though we had a lot of uncertainty, especially towards the end of the quarter with the Iran war. From here, I'm still worried, guys. My base case has been, and look, none of us knows, but I think everything going on that we almost have to have a mild recession or we're really, really headed towards something this year, hopefully mild. So we'll see. But I like the actual data better than me just guessing or spitballing.

Starting point is 00:10:50 And I appreciate that, you know, things aren't as bad as they could be, if nothing else. And there's some solace on a Friday in that, right? For sure. And I think that we're going to touch on that a little bit later in the show, Lou. So thanks for teasing that. When we come back, we have some trends to talk about in digital advertising. This is Motley Fool Money. You gotta try breakfast at A&W

Starting point is 00:11:21 And what better way than with a delicious Pret Organic Coffee? Starting at just $1 all day, every day, now until December 31st. You gotta try breakfast at A&W At participating A&W locations in Ontario. welcome back to motley fool money guys this is very interesting meta platforms the company that owns facebook instagram and more according to a recent report from e-marketer this is a third party research group meta's digital ad revenue is on pace to surpass alphabet this year now you look at Alphabet, this is Google, this is YouTube. These are just incredible powerhouse

Starting point is 00:12:21 digital advertising brands. Meta's digital ad revenue expected to hit $243 billion this year and that would be higher than Alphabet. This is just, I mean, wow, Asit. I think here we have a really fun changing of the guard. I think that Meta is almost better suited for the digital advertising age than Alphabet is. Alphabet, of course, search. And they have YouTube, which is this amazing ad property. But what Meta has done over the years is two things. One, they've diversified all of their platforms through acquisitions. So they have multiple paths of attack. You have Instagram, you have WhatsApp, you still have Facebook, it's still around. And they've also simultaneously invested a lot of money. I always

Starting point is 00:13:06 accuse Zuckerberg of burning up cash and so does the rest of the market. But one of the byproducts of his really big spends on the metaverse, has been this great leap in the advantage they have in technology, being able to monetize you and me, whoever's on their platforms. So the AI investments turned out to be fruitful for this one thing. And now they're doubling up on infrastructure investments and inference investments, custom silicon. So they've got eyeballs in place and they've got a better machine to monetize those eyeballs. Their ecosystem is just a little bit more purpose-built than Alphabet's broader ecosystem, which has to do two things now. They have to monetize this, but they also have to compete with AI because that is

Starting point is 00:13:50 simultaneously helping their search business and undermining it. I mean, Meta, great business, but let's not get too panicked about Alphabet, even if we're crossing a threshold here. Both are growing. That's sort of the interesting thing to me. Meta is just growing faster. Two years ago, we were debating whether or not Alphabet's ad business was vulnerable to AI, whether or not this was all just going to collapse. Now we're talking about from just this number going from $196 billion to $239 billion in one year. That's still pretty good, even if they're getting passed. And eMarketer lets notes. They're projecting continued growth through 2028 at least. And I think 2028 doesn't mean anything other than this is just kind of

Starting point is 00:14:31 where they cut off. So the takeaway for me is what we already know. These are two incredible money printing machines. One may be going a little faster right now, but neither looks like the gas is running out. And what they do with the cash, always debatable. That is changing. But the good news is they're starting to position where they are generating all this cash. Yeah, I think it's so interesting that we forget sometimes that this is a prevailing trend that the linear advertising dollars are moving to digital channels because they can be better measured. And to your point, this isn't a zero-sum game because the entire market is growing. And you said these are two money printing machines. But let's talk about one more money printing machine when it comes

Starting point is 00:15:20 to digital ads. The number three player continuing to take share is Amazon. Amazon is interesting because most of us missed that they were really learning the demand side of the digital advertising business for many years. Many of us were focused on the fact that they had this great closed ecosystem with Amazon.com and vendors who wanted ad placement. But in the meantime, Amazon really was trying to figure out how they could monetize similar to the smaller platforms that often sit on their servers. And I think once they figured it out, they did something that surprised many observers and probably surprised the trade desk, which has been a very interesting investment to hold, speaking of digital advertising, in that they

Starting point is 00:16:08 didn't decide to be a walled garden, sort of like Meta. Now they're extending their ecosystem and capabilities outside of the Amazon.com sphere, and they're partnering with many other businesses. And to your point, John, they're really good at measurement. That's one of the crucial things that Amazon can provide you if you want to advertise on their ecosystem. First of all, the channels are very direct. So folks aren't going anywhere once they're on that ecosystem. But the tools that they've developed are surprisingly robust. The data that they give you back for every dollar you spend on a click, right now it's equal to the efficacy you get out of the Trade Desk platform, which is why investors rightly perceive there's a big threat

Starting point is 00:16:51 over there on the Trade Desk side. But like everything else Amazon does, I've just been a little surprised at how fierce of a competitor that company is. And once they decide to take margin within an industry, they'll stop at nothing until they learn that business very, very well. And they've got a deep, deep, deep balance sheet so that they don't make any mistakes. The mistakes they make along the way are very constructive and they're going to take that margin. Yeah, they're cutthroat. And we'll see how that works. And it's funny because this comes at the same time that there's reports that big Amazon sellers are beginning to boycott the advertising platform because the costs keep coming up. They just added a fuel surcharge.

Starting point is 00:17:33 This feels sort of mafia, like, go ahead, make my day with this. But again, it's a different business. Maybe, you know, I don't know. I could go either way. Is it stronger or weaker than kind of meta and alphabet people go there because that's where the eyeballs is versus because you have to. It feels like the one thing about Amazon that's weird is, is that outside of Amazon's ecosystem, some of the ads at least could end up going against your partner sellers, you know, like, oh, you think you want this, you can get it from my partner, but here, here's an ad about something else. So there is sort of a tension and there is sort of this captive audience that you have to manage, which makes it different, but very impressive. And yeah, Amazon, I would never want

Starting point is 00:18:19 to be a partner with Amazon, guys, because it feels like nobody ends up with margin. And whatever that says about the partnership opportunities, it really, really does speak to the strength of Amazon's business. As we close this out, Alphabet may be losing some ground in digital advertising, but it's gaining some ground, according to a new report from SimilarWeb. When it comes to Gemini, this is the generative AI tool. It's taking share from chat GPT. This has already been a trend, but it's continuing to go on. Pretty interesting. Yeah. I don't know what to make about this, though, because if we think first mover advantage matters, well, then opening had that and didn't. I think we're so early here. I don't

Starting point is 00:19:05 know if we can read into market share. I said, I don't know if you have any thoughts on that. Kudos to them. It's nice to see winning, but is it sustainable? Who knows? Yeah. But one thing is, it's harder to get back that market share once you've lost it for OpenAI. So yeah, let's keep our eyes on that one. When we come back, we're going to celebrate a very little known holiday. You're listening to Motley Fool Money. You've got to try breakfast at A&W. And what better way than with a delicious Pret organic coffee?

Starting point is 00:19:57 Starting at just $1 all day, every day, now until December 31st. You've got to try breakfast at A&W. At participating A&W locations in Ontario. Welcome back to Motley Fool Money. We like to have a little bit of fun on our Friday shows. And today is blah, blah, blah day. And I am serious about that. This is an actual day. It was founded to turn meaningless chatter into meaningful action. And I thought that was kind of interesting from an investing perspective. There is so much noise out there on a daily basis. It is compounding, it feels like, every day. But what are investors actually supposed

Starting point is 00:20:50 to listen to? And what are they supposed to ignore? And then opposed to what are they supposed to take action with? So here's the game that I have for us today, Lou Ossett. There are some news items from popular companies this week. And I'm just going to basically read the gist of the headline. And you guys are going to tell me whether this is blah, blah, blah, or if this is actually something that we should pay attention to. First up, we have Rocket Lab. RKLB is the ticker symbol there. It is making an acquisition. It bought Mineric for $155 million. This is laser optical communication terminals. Asit, what do you think? Blah, blah, blah, or should we listen here? I think it's important to listen, John, because it's indicative of what you need

Starting point is 00:21:39 to do in this space. So, the company that Rocket Lab acquired, Minarik, I hope I pronounced that correctly, they are helping satellite constellations communicate with each other via lasers. And this is sort of a diversification of both supply chain and revenue for this business. We see this a lot in the space race, because the more concentrated you are, the more vulnerable you are to those government contracts, which can make or break a business. So I've seen in general, and I follow the lunar space, a lot of branching out into services. How do we become more of a total solutions provider and less of a one-trick pony? But I'm very interested.

Starting point is 00:22:22 Lou follows this space pretty closely. What are your thoughts? Yeah, I mean, it's definitely somewhere in the middle, but I think it's worth watching. Minarik in and of itself isn't going to move the needle. I mean, Rocket Lab's valuation is not going to be justified by this $150 million deal. But what Rocket Lab is very good at is, A, they're this end-to-end provider. So they are not just launching things into space, but they are building these systems, designing them for customers. That gives them visibility into the supply chains. And they've been very deliberate

Starting point is 00:22:52 about trying to buy up areas where they see scarcity or bottlenecks. And this should benefit them, A, because they get a solid supply of these components they need, but also it allows them to possibly benefit or generate revenue when other companies, when SpaceX needs these parts as well. So the trend is very, very, very important to the Rocket Lab story and making the bull case. Whether or not this deal in and of itself is a defining thing, probably not. But I love the direction they're going and I love the strategy. Well, let's move on to another acquisition then. There's a company out there called Monarch Tractors, and they have been working on self-driving tractor technology. This week, we're getting news that Caterpillar, ticker symbol

Starting point is 00:23:40 CAT, is acquiring the company. Why is Caterpillar getting into self-driving tractors, Lou? Is this blah, blah, blah, or should we pay attention? I mean, I want to believe here, and I do think that it's a some level autonomous makes more sense and kind of controlled settings like construction sites and what deer has done with agriculture. But I, I, I, I mean, I think this is a blah, blah, blah, tuck in until it isn't. I I'm glad they're looking at this. I think it's interesting, but in terms of investability, the idea that, but you know, that this is going to move the needle for Caterpillar anytime soon, I can't get too excited about it as much as I want to. I agree, Lou. This is blah for me. And the reason is, it's a very small company,

Starting point is 00:24:27 Monarch Tractor. Probably most investors haven't heard of this company, but it did something, tried to do something that was way too ambitious, both an electric tractor and a tractor that would be autonomous. So either one of those would be a huge leap, and they're trying to do both at the same time. So here we have Caterpillar coming up and picking up the pieces of a business that failed. And it's play money for Caterpillar. And it's going to be a play side project. They will probably extract some technology to make something more of this, but it is not going to be anything. I will be shocked if we hear anything that can be fruitfully developed from this within the next three years. Okay. So let's go a little bit bigger than here. Let's talk about

Starting point is 00:25:15 Meta and Broadcom. These are two trillion-dollar companies. We saw that they have a new partnership in place to develop custom silicon. This is a multi-phase plan, from what I understand, and the initial phase equates to a gigawatt of computing power for Meta. To put that in perspective, we're talking about a nuclear reactor worth of electricity here. Asit, what about you? you go first. Is this blah, blah, blah, or is it material? It's trying so hard not to get stuck in the middle. The reason I say this is because every day we hear of a new partnership for custom silicon with some hyperscale provider that's going to provide an enormous amount of capacity, and usually there are billions of dollars attached to it. Now, why investors want to pay attention

Starting point is 00:26:06 here is that it's another step by Meta to become more Amazon-like, more Alphabet-like in its ability to create its own custom accelerators. So that is branching into GPU territory, meaning we might need less NVIDIA. And it also helps them on the inference side. Earlier, we were talking about Meta's ability to monetize your attention and my attention. The more custom solutions they have

Starting point is 00:26:30 within their own data infrastructure, the cheaper it is for them over time to serve up the ads that catch our attention. And it's really great news for Broadcom because Broadcom has been saying for a long time that its XPUs, its own version of custom accelerators and the parts and pieces that network inference and also help with training, that those are very capable in the marketplace. I will note that the CEO of Broadcom, Hock Tan, is transitioning off the board of Meta. That means that this is going to be more of a commercial

Starting point is 00:27:06 thing. He wants to avoid a conflict of interest. So if you're a Broadcom shareholder, it's very good news. Yeah, I think spot on. I don't have much to add. I think collectively, all of these announcements are something we should at least monitor, but on an individual level, I hate to say blah, blah, blah, because they might be onto something, but I just, as an investor, I don't, I feel like that it's more the sum of the parts than it is any of these individual things. So AI is always in the conversation, gentlemen. And this week we saw that Snap, this is the parent company of mobile apps, Snapchat, is announcing some pretty major layoffs. This is up to 16% of its workforce saying we can be more efficient with the use of AI. We don't need as

Starting point is 00:27:48 many employees anymore. Lou, is this blah, blah, blah? I think the excuse might be. I feel like all of these companies overhired and now using the cover of AI, they're all kind of undoing maybe the mistakes they made in the past. But look, you know, 15, 20% of the workforce, $500 million in savings, that's not nothing. So I guess if you want to invest in Snap, you definitely should be paying attention to it. I have a hard time figuring out why anything coming from Snap is anything other than blah, blah, blah, if I'm honest. I just, I can't get too into it. Maybe you can tell me I'm wrong, but I think on a company level, if you see something more than blah, blah, blah, you have to take this seriously. Millions of teenagers would disagree

Starting point is 00:28:38 with you, Lou. I don't necessarily disagree with you. I think that for Snap, they don't have those deep pockets to compete with the metas of the world. Bigger giants who have also social media platforms. So for them to be leaner makes sense, to have smaller teams that are using AI makes sense, to try to preserve their audience and somehow grow it. And they've got a pretty interesting first point of AI contact themselves within Snap. So they also are competing for that first question that you want to ask, why not just ask that within Snap? I think it makes sense for them. But overall, as far as markets are concerned and where you might want to invest in AI-forward businesses, it probably is a bit of blah. All right, Asit, Lou, one final item before we move

Starting point is 00:29:27 on. Yum Brands owns Taco Bell. Taco Bell's famous Diablo sauce is being turned into a powder and dusted over its new chicken nuggets. Is this blah, blah, blah? Or man, is this time to back up the truck on Taco Bell? Asit is a healthier eater than I am. I don't know what you're going to say here, but I, as a rule, I don't know if I want to eat anything that is dusted with something that dusted is not a word that I usually associate with yummy. Uh, you know, I, I Taco Bell kudos to them for constantly, are we going to say innovating or trying new things? So I think for Taco Bell, this is a good thing, but I, I I'll be driving the Kava, not Taco Bell. Well, Taco Bell in turn owns a little chain called Live Moss, which is mostly drinks and concoctions, but I think they're

Starting point is 00:30:24 featuring these nuggets, et cetera, there. And let's call it for what it is. I mean, it's all chemical, right? If you're going to dust the nuggets, gosh, that sounds scary. Although I will say it's always a great combination, something hot with something cold. So kudos to them. Semi-important. I mean, if you're a Taco Bell addict, very important. Otherwise, semi. All right. Well, thanks for playing the little game today. Before we close out this segment, let's talk about and acknowledge that the market is at a new all-time high. And if we back up the clock, just 53 weeks ago, we had the market bottoming out from Liberation Day tariffs. It was down 19% at one point. And then here earlier this month, the market was down 9%

Starting point is 00:31:07 as the Iran conflict got underway. But now, as of this taping, we're over 7,000 for the S&P 500, new all-time high, incredible comeback. Guys, are there any high-level reflections that you have for our listeners? The first is that we knew that the Trump administration plays differently than previous administrations. So everyone expected volatility. We weren't prepared for the amount that we experienced at the beginning. It makes the case that one should stay invested, that one should continue to invest. Personally, I initiated my playbook for when the market tumbles, but I will tell you, I'll be honest with you, I didn't execute to perfection. I got caught up in, all right, how low are we going to go? How bad is this stuff going to get? I've made a few

Starting point is 00:31:52 purchases. I feel okay now. In retrospect, I look back and think if I had just worked through the rest of that playlist, all the companies I wanted to buy, the cash I wanted to put to work in such situations, I'd be sitting pretty right now. But if I was sitting pretty, I wouldn't be here with you two blokes, moral of the story, have a plan, try to execute it, stay invested, keep invested, watch that mindset. It'll shift on you in a quick second. Look, you know, and we all know nothing, right? I mean, who would have seen it coming? And I think about that kind of in just thinking about what I said earlier about, I think we're going to have a mild recession. Take that with a grain of salt, because I probably would have said that last year too. Look, at some point,

Starting point is 00:32:32 I do think, and this was something that Austin and I were talking about earlier this week in event. Timetables, a lot of these things are moving at timetables that aren't instantaneous. So I don't know how much to read into this in terms of the market's reaction and what's to come. So I don't want to just say all's clear, all's good. But as Asit said, this is the argument for not timing the market, for playing the long game, for staying invested. Because even when things look like? I mean, if you look at the last year, you can say, how could the stock market be up with all this? And yet here we are. Yeah, totally, Lou. Things go on, right? So while we were all fretting about tariffs and all of this volatility, companies were still investing capital in the game

Starting point is 00:33:21 of the day, which is expanding out investments in data infrastructure. That's driving the economy where the economy is moving. So things go on and they come full circle. Markets remain in place And we can't predict the future very hard. But now, Lou, you did mention earlier in the show that based on what you're seeing, you wouldn't be surprised if there was a mild recession here in 2026. So is that something that you say, hey, maybe I'm going to change my approach here? Or is it just stay the course? No, I mean, for me, I'm trying to find investments. I don't like to trade. So I'm trying to find companies that my baseline cases, they are stronger than any one cycle. So, you know, look, maybe the opportunities change if things go down. So

Starting point is 00:34:06 I'm watching for that, but no, I'm trying not to react. A, as we've said, I could be wrong. And B, you know, look, it's just so hard to time the market. I'd much rather just try to focus on the future. And if anything, just get your mindset right. My biggest fear is panicking, having the animal instinct kick in and fight or flight if things do go down to try and avoid making rash decisions then. I'm much more talking to myself than I am talking to the markets these days. Asit, final word. For me, if we do hit a mild recession, that will be time to remember that the market is always moving ahead. It's always making its assumptions about what the future are. And it's a great time to look at the businesses that you like. It may be a key time to

Starting point is 00:34:58 purchase some of those. So don't assume once we hit a rough patch that the market's going to stay mired in that. The market's mentalities will probably shift before yours or mine does. Well, when we get back, we're going to be doing some stocks on our radar. You're listening to Motley Fool Money. or did you go to school by entering your cool yeah you're the kid on deck got a sticker in your face information about the case so you know your potential don't think you can't extend don't think you can't extend just comprehend you gotta try breakfast

Starting point is 00:35:50 You've got to try breakfast at A&W. And what better way than with a delicious Pret organic coffee, starting at just $1 all day, every day, now until December 31st. You've got to try breakfast at A&W. At participating A&W locations in Ontario. 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 all personal finance content follows motley fool editorial standards

Starting point is 00:36:32 and is not approved by advertisers advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Gentlemen, we'd like to end the show on Fridays with stocks on our radar. And I feel like Asit is the visiting team today. So I'm going to let Asit go first here. Sure, John, I would like to talk about a company called LPL Financial, that symbol L-P-L-A. This is America's dominant wealth management platform for independent advisors. There's a shift that is going on from very big firms like Merrill Lynch, which have these traditionally established wealth management businesses that are commission-based, to independent advisors, which charge a fee

Starting point is 00:37:17 for their services. This platform has thousands of independent advisors on it, and it has trillions in assets, about $2.4 trillion in assets that it manages. It serves 8 million Americans. What's very interesting about LPL is that it's growing its top line by an organic rate close to 10%. It's growing its earnings by a double-digit rate, but the stock is down. Why? Because investors perceive a threat from AI. The thesis is that AI is going to disrupt this business and the wealthy are going to use chatbots to manage their vast holdings. I happened to chat with an LPL advisor at the member event that Lou and I were at recently that he mentioned a few moments ago. And his take was very interesting. He said, well, it's sort of

Starting point is 00:38:06 the opposite. The wealthier people get, the more they want to talk to humans about how to manage their stuff. This platform is growing. I see a great mismatch between the current price and the potential of this business. A huge business, little known to most of us. You know, those acronym businesses, hard to keep in your mind when you name yourself with a bunch of letters. So we got to flip this to our man behind the glass, Dan Boyd. Dan, do you have a question for Asit for LPL Financial? Really just a statement this time, John. I think it's crazy to trust a chatbot with your financial well-being. So I see maybe a bright future for LPL Financial Holdings. All right. Strong start here. Lou, can you top it? I don't know about that. All right,

Starting point is 00:38:51 but I'll try. Dan, I am looking at Leidos Holdings, ticker L-D-O-S. Leidos is a provider of tech and services to the government, including the screening tools the TSA uses at airports. This week, Leidos announced plans to shift that business into a joint venture with a privately held company, Angelic, in return for a 41% stake in that entity. Dan, this is a big business for Leidos, about $600 million in annual sales, but it was in high margin and it needed constant investment to develop new tools to stay ahead of the bad guys. This deal will allow Leidos to stay in the business, but use its cash in other ways, including investing in higher margin businesses. This company shares it down 20% or so from its highs for the year. It is a well-positioned

Starting point is 00:39:36 defense tech business with exposure to red-hot areas, including space and cyber. Looks pretty attractive to me. Dan, questions on Leidos? You know, y'all are going to have a hard time convincing me to put my faith behind the people behind the screening equipment at the airport. That whole situation is a nightmare. They are getting rid of it, at least. Is that a plus? Yeah. Sooner rather than later. Okay. LPL Financial and Leidos. Dan, which one are you going with this week? I hate to do it to a Virginia company, but I'm going to go LPL Financial over Leidos.

Starting point is 00:40:12 Dan's doubling down on humans that's all the time we have for today thank you so much to our listeners for joining us we will see you again next time

Motley Fool Hidden Gems Investing - The Market’s New High Is Anything but Blah

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