Motley Fool Hidden Gems Investing - The Treat Yourself Economy Rolls On

Episode Date: April 15, 2024

Retail numbers tell the story of a strong consumer. (00:21) Bill Barker and Deidre Woollard discuss: - Retail sales numbers and what people are and aren’t buying. - What drives good numbers for Goldman Sachs. - Charles Schwab’s bounce-back quarter. (14:24) David Meier interviews Fluence Energy CEO Julian Nebreda on opportunities in the energy storage industry. Companies discussed: FLNC, SCHW, GS, HD, LOW, DNUT, PLAY Host: Deidre Woollard Guests: Julian Nebreda, David Meier, Bill Barker Producer: Ricky Mulvey Engineers: Dan Boyd, Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

You've got to try breakfast at A&W. You've got to try breakfast at A&W. And what better way than with the delicious Pret Organic Coffee? Starting with just one dollar, all day, every day, now until December 31st. You've got to try breakfast at A&W. At participating A&W locations in Ontario. It's April 15th, file those taxes and then treat yourself. Motley Fool Money starts now. Welcome to Motley Fool Money. I'm Deidre Willard here with Bill Barker on this Tax Monday.

It's April 15th, comes around every year. Bill, are you early on time or a late filer? On time, but on time meaning the day of, yes. Oh. Are you rushing? Well, I guess we don't rush to the post office anymore. We sort of rush to our computers to hit submit. I've done that in the past, yeah. Really? I have delivered taxes with all the people getting in there at midnight. No longer. But I've got a few more of my kids' taxes to finalize than my own. I almost miss those days of everybody rushing to the post office and trying to shove it in the little slots and them having to stay open late. Now it's easier.

Yeah, I remember those days more than I remember the moments of hitting send or whatever from my desk. But I don't know. They're not happy memories, not really. No. Well, I don't usually get the pleasure of your company on a Monday, but I do today. And I know you're kind of a macro guy. You look at these things. On Friday's show, Dylan and the team, they talked about inflation a little hotter than

expected. Today, we've got retail sales numbers also higher than expected, about 0.7% up sequentially in March, 4% year over year. February also revised upward. Interesting to see what we're spending on. of course, furniture and building supplies and lawn stuff, not yet, maybe later. Food and restaurant spending still up. The market, very happy about these numbers today, seeming to pay more attention to this than some of the geopolitical turmoil that we saw over the weekend.

Are we just hungry for good news and happy consumers? Yeah, I mean, it's a pretty tepid amount of good news, at 4% year-over-year, which is slightly ahead of inflation over the same period, depending on which measurement of inflation you're talking about. It's ahead, but people are consuming on the retail side a little bit more than they did last year, and with some inflation. So, that's how you get up to 4%. And March is interesting in that this year, Easter fell last day of March, so that moves some spending, some restaurant spending, people going out for Easter brunches and things like that, as families, gatherings that you won't have in April this year. And I know that the retail sales number is adjusted seasonally,

I'm not sure what adjustment it makes for that, particularly difficult to remember part of the the calendar. That is, most people don't know why Easter falls where it does. It's not intuitive in the way that it moves around. But anyway, it was in March, and that's going to help March's numbers a little bit. And unless you make the adjustments, you might be misled by how good the numbers were. But one more piece of evidence that the economy is doing just fine. Yeah. Anytime we get better than expected, the market seems to be happy. We just want to know the consumers are going to keep opening their wallets. Seems like they are. I mean, we had the consumer sentiment numbers out from University of Michigan last week. It seems to be on pause a bit. Maybe they're reserving judgment after the election. At least that was the assessment. You know, I'm wondering about this and about the cycle of bigger ticket spending in general, because, you know, we had the post-pandemic rush of everybody buying things or during the pandemic, too. You know, we haven't gone back to big ticket items.

I'm sort of looking at companies like Home Depot, Lowe's, Wayfair. They're really sort of kind of waiting for things to change. How is it impacting some of the companies you watch? Well, the companies you mentioned are going to see people waiting, perhaps, for the interest rates to improve if you're doing a remodel or an addition or something like that, where some of the revenue is going to fall to Home Depot and Lowe's. And you may just wait a little bit longer for a better rate on the loan that is probably going to be involved in a big-ticket item, a car, a purchase of vehicle of any sort, whether it's a boat, an RV, a car,

a lot of things are almost always financed and there are choices about when to make those purchases. And the constant evaluation and half-promise that, oh, yes, interest rates are going to go down, but they have not yet, allows people to maybe move some of that spending currently into one more meal at a restaurant than they otherwise were, or a little bit more in the experience category, a vacation is sometimes financed, but not as much as a larger purchase. I think that experiences, there's still a backlog of experiences that people wanted to have and had to delay for a couple of years because of COVID. If you look at the number of people, talking about sentiment, the number of people who anticipate

making a foreign trip this year is at, I think, record highs. It's not to say that they have done it, it's not to say that they purchased the plane fare yet, although I think Delta came out the other week and indicated that advanced plane fares looked very good to them and they were anticipating that the rest of the year would go well. So, it's still in that category. People are giving themselves the experiences and pushing off for a little bit for the moment, stuff that they have to take out a loan for. Well, let's move on to some earnings. We've got a couple today, much, much more coming later in the week. We're really getting into, into the hardest season, uh, pretty soon, which is always

exciting. Uh, so Goldman Sachs, uh, good, good quarter, you know, uh, CEO, David Solomon, people were not thrilled with him over the last year. So, you know, he, people were giving him a hard time about his side hustle as a DJ. He's, uh, sort of retired, I guess on that, it seems, But, you know, really improving at Goldman Sachs, they've sort of shaken off their misstep into consumer banking. They're like, we're done with that market stuff. But a lot of the story is just that the macro is working for them. So, more activity, more M&A, giving them the opportunity to really do what they do best,

it seems like. Yeah, I think so. I think their fortunes are going to track the stock market largely, as they have in the past. It's a company that has achieved great things, more for its employees than for its investors. You really struggle to find a prolonged period during which Goldman Sachs investors have outperformed the market. They do a great job of rewarding their employees, they ask a lot of their employees and they get a lot in return. And the amount that is leftover for investors is fine, it often matches market returns. But you look at today's numbers and if you

annualize the earnings per share, that was a good quarter. You multiply those by four and you see what the stock price is, it's trading at about an eight or nine multiple to the run rate earnings. Now, as I say, it's a good quarter and maybe annualizing those is a little unfair in this equation. But still, the market is not looking at Goldman's report, which easily surpassed the anticipated earnings and revenues, and saying, look, there's great growth here, let's start pricing this stock like a growth stock. It's a cyclical. No, it is not primed for massive growth, but it is doing better and that is good to see. Yeah. I mean, for the shareholders, for the employees, I'm sure you can find somebody

who will say it's not good to see Goldman doing well, that must mean somebody is doing poorly as Goldman does well. But yeah, I think that they've got, what are they, up about 3% today off of really stellar numbers. The market looks at those numbers and is pleased, but does not take those as an indication that this is a new age dawning for Goldman. If it's going to trade at something less than 10 times run rate earnings, then it's being traded like a cyclical. Yeah. We're going to need a lot more activity to see those numbers really go up. We've also got earnings from Charles Schwab, which the market did not like as much. revenue uh they revenue beat i think expectations but uh down year over year but there was this word

in the press release that caught my eye and they said it too on the call momentum so they're talking about momentum and sometimes when a company is talking about momentum i kind of roll my eyes because i'm like yeah yeah you got momentum but i don't know you know they had 14 billion in net inflows to manage investing solutions which i found was interesting uh because that gives them a lot of fees. They're also nearly done with the Ameritrade ingestion. They've got about 10% of people they're bringing into that left, and those are mostly the super active traders. It seems to be a little similar to the Goldman story. They're regrouping and on a more steady path. What do you think? Momentum, do they have it?

I don't know about that. They've got momentum in terms of all the assets that are in Schwab having gone up along with the market, all the ones that were in the index funds and any other mutual funds or individually held stocks. People are employed and there are more people employed every month as we get those numbers and a lot of people have their company 401 s at Schwab. So, I mean, it's a strong economy and the stock market is the strongest part of a strong economy. And I think that that all accrues to Schwab's benefit. Of course, a year ago, they were looking like they were in some trouble as they got caught up in the commercial bank, the proximity to it and the amount of assets that were leaving Schwab

for better interest rate accounts, and that Schwab sort of got caught up in, I think, a misguided anticipation that they were in real trouble regarding anything, but that their stock was hammered along, not as badly as sort of the companies that really did go belly up during that time. But if you watched Schwab a year ago, you're pretty happy. Well, Bill, we started by talking about tax day. You've still got some work to do, it sounds like. This day is also becoming a weird retail event, holiday, I'm not even sure what to call it. You've got all these freebies and deals. You've got Krispy Kreme in on it. You've got Arby's. Our producer, Ricky Mulvey, said, you know, you got the 50% off the Dave and Buster's menu. Sounds like that really caught his

companies are also advertising ways to spend your tax refund. What is happening here? Have we unlocked a new spending holiday? I don't know. I get with Krispy Kreme. If you're going through, this is a stressful day. You want to give yourself a little treat. You get a little reward to offset the stress or to reward finally getting the work done. Arby's is a little less easy for me to see the straight-line connection between the two. Dave & Buster's could be a night out after getting everything done. And you get the reward of the media, including us right now, telling you the names of these places and what they will offer for you without having to spend the money yourself. That is, the number of times that

tax day is going to be mentioned along any media that you're looking at, they're going to throw in something like this, just as we are. And I think Krispy Kreme is right now getting a little free advertising. Let's give Arby's some, too, while we're at it, and Dave & Buster's, and there are probably more that we could and that are getting something out there. So, if you can actually get your name out there without having to pay for it, that's pretty good marketing. It is indeed. Treat yourself. Economy continues. Thanks for your time today, Bill. Thank you. and fix it before it's missed.

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the CEO of Fluence Energy, a provider of energy storage solutions and services in the renewable space. We're playing a cut on today's show and get a look at the challenges and opportunities of battery storage around the world. So why is the demand for energy storage products growing so quickly? And how is Fluence working to fulfill that demand? So we're a global company. We don't work in China, which is a very, very important market. So, when we say globally, it's outside of China. So, we have a very strong presence in the U.S. Clearly, we have a very strong presence in Europe. I'll walk

you through the countries where we see where we're working, and then a strong presence in Asia Pacific. In the Americas, where in the U.S. and Chile are our main markets, we canada open it up and what what do you see how do these markets come about they come about today our technology is used mostly mostly to integrate renewables not the only thing this technology that this technology is going to do over time but that's what we're doing today that's a function we are providing support for the grid to integrate renewables so we are in a way a function of renewable integration. As renewable integration goes into the market, you start needing, you know, services, support, frequency, time shifting of energy, points, you know, helping decongestion

on the grid here or there, that batteries can do better than any other technology. So, the U.S., clearly, our biggest market is started with this. And when you see the U.S. Sounds like a big number, but in the U.S., a lot of the work occurs in California and Texas. Texas, there are some connections in Arizona, but yeah, generally those two areas, or those two systems. They represent, say from 2024, they will represent like two thirds of the demand for energy storage in the U.S. And then the next comes in ISO 9, you know, and all the different ISOs in the U.S. And you see it picking up coming.

We're seeing Chile is now what main demand center for a reason. Most of Chile has this wonderful solar resource in the north of Chile. But most of the demand is in the south. So what's happening to Chile? And there are difficulties, as you know, if you go back to Chile. It's a very long country with, you know, a mountain range in the middle, building transmission lines is costly, complicated, difficult. So there are restrictions in the way of transmission.

So you have very low prices during the day in the north of Chile, and you need to, in a way, figure out a way of transferring it to the sector. And that's what we do as batteries, generally. We charge during the day, and when the peak hours come, we help reduce the total cost of it. So that's Chile. Those are the two. And then Canada is picking up.

Canada, what was interesting in Canada is that when you see these markets, some of them start with small projects. They came out, you know, with very, very big projects. And then we have Europe. In Europe, I think the two markets that are today, you know, are the U.K. and Germany. The U.K. and Ireland, you know, not as a same country, but the U.K. and Ireland, so the western side of the European continent,

and now Germany is coming up. And Germany is picking up. And that's where I think Europe will. We see the Middle East as a potential market to grow and now if you were to Asia We we are, you know, we're in Taiwan and the Philippines and now Australia Australia I said, you know where the demand is picking up, you know a lot of it clearly a country that has requires You know, you'll see transmission lines go, you know crossing over the continent there have to be all around so it requires You know that they need a lot of support. They had a lot they they had make

Australia made a huge bet on distributed energy, distributed solar, rooftop solar. So now, they need the batteries to support that technology. And I'll say the next market that's coming up is India. Like I said, the Middle East and Europe. For Asia, I think it's India. India, India, a lot of announcements, but, you know, India, it always requires a lot of work. Why do I go in over all this, you know, panoramic view? We believe that in order to build a company like, well, we got first on our mission, transform the way we power the world, we need to have a global scope. But putting that aside from a mission perspective, from a risk perspective,

markets some markets will you know do two different things will cool and hit up i think having a global exposure allows us to ensure that we can manage our growth as we if growth is a big driver of our ability to create value for our shareholders right then you know that this capability and then next year australia is going to be very important you know then you know at some point, India, at some point, Germany. You will see that, and then we are able to manage as these markets cool and heat up over time. Well, Julian, we really appreciate you taking the time to speak to us this afternoon. For me, Fluence is such an interesting company, as well as an interesting investment opportunity, because it combines growth and scale

than an attractive stock price. And that's not something that you necessarily see in the markets all the time. But with that, is there anything else that you'd like viewers to know about Fluence before we wrap up? Thank you so much. Again, thank you for the opportunity. My other comment is that this is something very, I already said it, but I want to make the point of it. Battery storage is a very versatile technology. is just starting to do what it will do for the grid and for the way we power the world, the way we consume energy. It's going to change completely the architecture of how we consume electricity,

how we produce it, how we transmit it, and how we consume it. Right. We are committed to that world. Today, we're doing what we have to do, but we're committed to that world of it. And there are many other companies committed to this in different ways. But we're one of the few, we're the only one publicly listed, but we're one of the few that only does this. What I think about in the morning, what I dream about when I'm running,

what I'm thinking about, when, you know, what stresses me or pleases me comes from this technology. And the 1,500 people in this company are the same. And I think the importance of the technology requires that level of attention. And to investors who are outside, you know, clearly we believe this is a great investment opportunity. We don't want to go into that. But I think that the people who want to support transforming the world and want to understand the importance of this technology and understand the complexity of what we're doing, having companies that only do this is tremendously important.

for the success of this technology and changing the way we do sales. So, you know, I invite you all to read about Fluence. You know, you can read the short sellers and the many, many more reports that are outside. You should read them all. Don't worry. You should read them all.

Absolutely. You should read them all. You know, per one short seller reports, there are, you know, hundreds of buy sales. Don't worry. I'm not concerned about it. Go read them, figure it out. Come talk to our investor relations people.

Ask us questions. We love to talk about this. We love to communicate. And, you know, hopefully we can bring some of you to help us support as we continue to transform the way we power the world and continue growing these industries. 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.

I'm Deidre Willard. Thanks for listening. We'll see you tomorrow.