Motley Fool Hidden Gems Investing - We Love Cooling Inflation!

Episode Date: November 11, 2022

Several factors in the Big Macro pushed stocks higher at week's end. (0:30) Jason Moser and Ron Gross discuss: - How the Consumer Price Index report fueled an historic rise on Thursday - China's potential for pulling back Covid restrictions - The role layoffs will play in the coming months - Disney's parks division being the lone bright spot in an otherwise disappointing 4th-quarter report - The latest from The Trade Desk, Lyft, and Marqeta (19:15) Rachel Warren talks with Anjee Solanki, National Retail Director at Colliers, about the top retail trends this holiday season and how consumer spending continues to change. (32:10) Jason and Ron return to talk about - Carnival Cruise's intriguing strategy to battle rising food costs - Two stocks on their radar: Outset Medical and Titan International Stocks mentioned: META, RDFN, AAPL, DIS, TTD, LYFT, MQ, CCL, AMZN, TJX, DLTR, YUM, WMT, OM, TWI Host: Chris Hill Guests: Ron Gross, Jason Moser, Rachel Warren, Anjee Solanki Producer: Ricky Mulvey Engineers: Dan Boyd, Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey Ontario, come on down to BetMGM Casino and see what our newest exclusive, The Price is Right Fortune Pick, has to offer. Don't miss out! Play exciting casino games based on the iconic game show, only at BetMGM. Check out how we've reimagined three of the show's iconic games, like Plinko, Cliffhanger, and The Big Wheel, into fun casino game features. Don't forget to download the BetMGM Casino app for exclusive access and excitement on the Price is Right Fortune Pick. Pull up a seat and experience the Price is Right Fortune Pick

only available at BetMGM Casino. BetMGM and GameSense remind you to play responsibly. 19 plus to wager. Ontario only. Please play responsibly. If you have questions or concerns about your gambling or someone close to you, please contact ConnexOntario at 1-866-531-2600 to speak to an advisor free of charge.

BetMGM operates pursuant to an operating agreement with iGaming Ontario. 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. Joining me on the show, Motley Fool senior analysts, Jason Moser and Ron Gross. Good to see you as always, gentlemen. How you doing, Chris? We got the latest headlines from Wall Street. We've got a closer look at retail trends heading into the holidays. As always, we got a couple of stocks on our radar, but we begin with the big macro. On Thursday morning, the latest consumer price index report

sent the stock market soaring. The S&P 500 rose 5.5%, the Nasdaq rose more than 7%, all because inflation rose just 0.4% in October, Ron, which was lower than economists were expecting. If you had told me at the time it was going to be a report that was a little cooler than economists were expecting, I would have guessed the market would be up. I wouldn't have guessed this. Oh boy, oh boy. If you didn't like Thursday, Chris, you weren't trying, because there was something for everyone across the board on Thursday. This is a big sigh of relief rally, I think, perhaps indicating that inflation is moderating. Some of the things that factored into that better than expected report were

a decline in used vehicle prices that had a relatively big impact. Apparel prices, medical care services also were lower, but there was offsets. Offsetting that were still higher fuel costs and really more importantly, higher shelter costs, which make up about a third of the CPI index. That acceleration was fueled by the biggest jumping costs of hotel stays in more than a year. That's important to note. It's really about hotels in this specific circumstance. One thing to note is I think we're seeing rent and housing costs come down, but there's a lag and that's not going to show up in the data for a while. But when it does, I think you're going to start to see people even get more excited. We got the

better than expected print as they say on Wall Street and Treasury yields fell sharply on the better than expected news. As I said, I think investors are hoping we're seeing peak inflation. And now they're waiting for what's called the Powell pivot. It's when the Fed chairman will slow or stop the interest rate hikes. I think we've still got a long way to get to the Fed's inflation target of 2%. So don't think the rate increases are going to stop anytime soon. Futures tied to the Fed fund rates indicate an 80% probability of a 50% basis point hike in December. But I think there's hope that inflation is coming down. We can either avoid a recession or it will be mild. And that's why the markets rallied so much. I don't ever recall seeing

an index up more than 7% in one day. Same. Although, Jason, I don't know about you, but why don't we wait for Jay Powell to actually pivot before we actually name something the Powell pivot. But to Ron's point, we got this report, eyes go back to the Federal Reserve, don't they? I'm making a mental note here. I feel like after the show, we need to establish a Powell pivot Twitter feed because it's just too good. I mean, you can just go so many different directions with it. Listen, that was the headline we all wanted to see, right? I mean, inflation easing better than expected. The market's performance this week has been mind-bending at times. I think that's great. I think Ron made a lot of good points there in regard to potentially we're

seeing inflation starting to ease in a more persistent fashion. You look at the prices that exclude food and energy, for example, that core inflation that policymakers see as more reflective of the trend. That was up just 0.3% from September versus an expectation of 0.5%. We are seeing data from Zillow and CoreLogic that shows that rent prices are coming down. Even property management software, a company, RealPage, they reported that apartment rents fell 0.6% in October from September. That's the third largest drop. It's recorded since 2010. Those are also very encouraging signs. But you look back in history here just a few months ago. In August, we had the same thing play out, better than expected inflation,

the market received the news very positively. The following month, we went back to inflation back on the rise. I'm hopeful that this is the beginning of a more long-term trend, but I think you got to take it with a grain of salt. Agreed. I don't think any economic conversation or recession conversation is complete without talking about the labor markets, especially in this environment. Labor market remains strong. Unemployment is sitting at 3.7% only. That's pretty darn good, which also may be pretty darn bad, depending on what your point of view is. But we do have some indication that it's softening. I think layoffs are certainly accelerating technology and financial sectors. I think we're seeing that. I feel like the cutting

in the financial sector is more cyclical and typical, while the tech sector is really reacting to, I think I'll use the word bubble, the bubble that occurred over the last few years and the over-hiring that resulted, and it's just necessary to pare that back as costs are too high and companies need to right-size their business a little bit to get their profitability where they wanted to be. A little bit additional softness in the labor market is probably necessary to get the Fed where they want to be. Well, and we saw signs of that already this week. We have meta-platforms starting to execute some layoffs, Redfin as well. And there's a crystal ball element to our conversation, but Ron, it does seem like

over the next six to 12 months. This is something investors should be watching when it comes to specific companies, particularly the larger tech ones, isn't it? For sure. We'll want to listen to guidance for our earnings estimates coming down. They're actually doing pretty well. I would have predicted that we would have seen the earnings come in a little weaker and guidance being a little weaker. I'm not seeing it as bad as I thought, which may bode well again for not having a deep recession. But we'll have to watch costs. I mean, the China news on Friday about their easing on some of the COVID restrictions is good. The Goldman Sachs described it as marginal and it won't really amount to more than a fine tuning. They really

have to go further away from their COVID zero policy for sure to make a huge impact. But that may help with supply chain issues and some other issues as well with respect to costs, but we'll have to watch individual companies. How is profitability looking? What does guidance look like? Chris Hill I'm glad you mentioned China because Jason, for those who missed it, on Friday, China announced a pullback of some of the country's COVID restrictions, including one dealing with international flights to the point that Ron made with the reference to the Goldman report. there was not a specific timeline. So, you know, if you want to take a bearish view of this

announcement, you can say, well, there weren't a lot of specifics. There wasn't a timeline. You know, let's wait and see. If you want to be a little bit more optimistic, you could look at the announcement from China and say, well, this is really sort of the first indication of the central government moving away from that zero COVID policy. And I'm just thinking of all of the times over the last couple of earnings seasons that we've heard companies talk about inflation, supply chain, China on their conference calls. And I don't know, maybe I'm looking through rose-colored glasses, but I'm choosing to be a little bit more bullish on this China announcement. What about you? Well, I appreciate that perspective. I want to

be more optimistic. And hopefully, again, maybe this is really the first sign, right? I mean, maybe they've kind of started to wake up to reality here and understand there are better ways to handle this, I think, than adopting that zero COVID stance. And maybe the easing of these controls, maybe this is that first step. I'm not sold that it is. I think it's odd to see this news coming out as I think the country is dealing with its worst outbreak in more than six months. I don't know what ultimately changed there. And maybe it ultimately amounts to nothing. Maybe this is just kind of like a headline and that's really all. But I mean, I think you go back to pre-COVID. I mean, we were having this conversation regarding China and supply chains well before

COVID. That's what I encourage folks to remember. We had companies in 2018-2019 really talking on earnings calls, looking for ways to diversify their supply chains away from China because we were having trade issues even back then. It's a difficult country to predict. They marched to the beat of their own drum, so to speak. I feel like if I'm a CEO of a company today, I mean, one of my top priorities would remain figuring out how to diversify my supply chain away from China. Because either way, I've seen enough to know that I don't have any faith really, honestly, in what they may or may not do going forward. Not just necessarily regarding COVID either, but anything else that comes down the pike. So, I mean, if I'm a CEO, I think you

really need to focus on trying to diversify the supply chain away from China as much as possible. but you're seeing big companies, I mean, Apple is even doing it, really. They mentioned they're going to have some supply issues with their upper-tier iPhones because of the supply chain hangups in China. We've already seen that they are making big efforts to move into India, for example, to produce more in India. I think that when you see even the largest companies in the world, like Apple, trying to do something like that, that's a real tell. It's going to take time for that to play out. It's going to take years for them to really appropriately diversify away. But I think we'll continue to see those conversations being had because I think it

really does matter. Earnings after the break, including entertainment media and the war on cash. So stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool money. Chris Hill here with Jason Moser and Ron Gross. On Wednesday, shares of Disney had their worst loss in 21 years. Fourth quarter profits were well below expectations and the company warned about slowing growth for its Disney Plus streaming service. Ron, how warm is the seat that CEO Bob Chapek is currently sitting on? Getting warmer, Chris. I'm not going to lie. This one made me wince a little bit. I've held this stock for 20 years, my family has, and that's a big move for a company like Disney, a stalwart like Disney. So yeah, it was a bit of a shock. Disney

Plus costs are ballooning or have ballooned. The media business was also weak. Some metrics to back some of this up, Disney Plus added 12 million net new accounts. That did beat analyst predictions. Now they have about 164 million subscribers, not bad at all. But the loss in the division surged to almost $1.5 billion, more than double the year before, due to heavy spending on content, marketing, and technology, which, let's face it, is sometimes necessary when you have a new business that you're looking to get off the ground and grow significantly. But I think what the investors and the markets are telling you is that perhaps was too aggressive, because they were not expecting that kind of a loss. As you said, CEO Bob Chaikpik, who is a bit on the hot seat, said

the streaming business has reached peak losses in the quarter. I don't know what that means, peak losses, but that's what he said. That doesn't sound good. That doesn't sound that good, but he said the business is still on track to reach profitability in fiscal 2024. Very important for us to watch that, to see if he sticks to that, because if he doesn't, then the hot seat gets even hotter. They've got some changes coming, price increases to some Disney Plus packages, a new ad-supported subscription tier taking place in December. Higher prices could backfire, though. We'll need to watch that carefully. Management does have plans to make cuts to marketing and content budgets. I think that's necessary. The one bright spot was a 36% increase

in revenue from theme parks, where Chapik comes from. Disney said the full year results from the theme parks set all-time records for the company in both the revenue and operating income. And as I said, the media division was weak. That's ABC, ESPN was a bit weak there. Overall, company-wide revenue up 9%. Adjusted earnings actually down 19%. Guidance was disappointing. 20 times forward earnings. I think earnings are going to actually get better, so it'll be even better than 20 times forward earnings. I'm not selling my shares at all. I'm going to let the company do what they do. Third quarter revenue for the trade desk came in higher than expected, but guidance sent the stock lower this week. This was before the big rally on Thursday, Jason. So, shares of the trade

desk actually ended up in the positive territory this week. So, put aside the stock, how is the business of the trade desk doing? I think the business is doing great. I mean, these reports get to be like a broken record, and I mean that in the best possible sense. They just continue to do their thing. They offer smart, achievable targets. They achieve those targets, and they just continue to focus on this big market opportunity that's in front of them, particularly on the connected TV side. The results, very strong, $395 million in revenue, $163 million in adjusted EBITDA, nicely exceeding their own internal benchmarks, and customer retention remains over 95% as it has for the past eight consecutive years. Going to that connected TV

opportunity, because that really is the big opportunity for the Trade Desk. It was their fastest-growing channel. It's become their largest. When you exit Q3, video, which includes connected TV, represented a low 40% share of their overall business and continues to grow rapidly, they say, as a percentage of the mix. Interestingly, too, this is becoming an international opportunity. The connected TV spend grew in the majority of their international markets faster than it did in the U.S. You look at this company with its partnerships with companies like Disney and Peacock, those relationships are only growing. Big tailwinds in the coming years for this advertising-supported video on demand. You've got a company here, generated $500 million in free

cash flow over the last 12 months, it's up 53% from a year ago. This for me is just one of those holdings that I grow more and more comfortable with as time goes on. We'll just check back in next quarter. The rally could not prevent shares of Lyft from falling this week. Active riders were down in the third quarter and shares of Lyft fell to their lowest point since the company went public in 2019, Ron. Yeah, not a good time for Lyft. Adjusted earnings were fine, but the revenue growth and the number of riders were disappointing. Revenue up 22%, active riders up 7.2%. Ended the quarter with just over 20 million riders that was short of analyst prediction and still below the $23 million it had before the pandemic.

Contrast that with Uber, who said their writer count had bounced back to pre-pandemic levels. Lyft reported $66 million in adjusted earnings, but their actual net loss widened to over $400 million as they issue new stock to employees to make up for its falling share price. Not something you really want to see as a shareholder. Fourth quarter outlook was in line with Wall Street predictions reiterated guidance of $1 billion in adjusted earnings in 2024. I caution investors to be wary of that number, and they're going to cut 13% of the staff to reduce costs, which I think is appropriate. From ride-sharing to the war on cash, Marketta's third quarter revenue came in higher than Wall Street was expecting.

You're a shareholder, Jason, how's Marketta looking to you? Yeah, a company I think folks need to be paying attention to. Remember, they operate a platform that delivers card issuing and transaction processing services. According to Bain Capital, the value of embedded finance, which is basically non-financial companies offering financial services in some capacity, the value of those transactions is expected to reach $7 trillion by 2026. That's important because those are Marketas customers. Clearly pursuing a big market opportunity. Total processing volume for the quarter was $42 billion in net revenue, $192 million. Gross margin 42% was down slightly from a year ago, but that was mostly due to timing and

business mix. The thing to pay attention to with this company, they're very reliant on Block. That accounted for 72.5% of their total net revenue for the quarter. But this is a nice problem to have. A lot of this comes from the success of Block, Cash App, the Cash App Card. We talked about how now Cash App Card, the attachment rate for those that use the app, you have 35% of the users now using that Cash App card, up from 31% just at the end of the year, and 25% from a year ago. That accounts for more inflows, direct deposits, people use those cards and spend more, all plays into Marketas specialty. All in all, I think things are looking good. All right, guys, we'll see you later in the show. Up next, Rachel Warren with a closer look

at the top retail trends this holiday season. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Angie Solonke is the National Retail director for Colliers, a professional services and investment management company. Motley Fool contributor Rachel Warren caught up with Solanke to talk about the top retail trends this holiday season and how consumer spending continues to evolve. You know, one of the things we've been hearing about is that there might really be kind of an unprecedented holiday shopping season ahead, which sort of seems counterintuitive in the current environment. But even just some of the earnings reports we've been seeing recently seem to sort of, you know, portend that that may be

the case. From your vantage point, what are you seeing? What retailers do you think are poised to do particularly well? We're going to still see, of course, the grocery spend, many buying to have parties at home, friends and family at home. People are really much more, I think, open to seeing one another in more of a large family format or family and friends format. So I think the spend is going to occur. We're going to see, I think, a soft peak as it relates to in-house decorations, more on the smaller scale still. But those home goods is going to do well. All the TJX brands, of course, are going to do quite well in that category because they're grab-and-go. They're fun. They're playful. From the consumer's perspective, if they're spending

you know call it 10 to 20 dollars in their mind they feel like oh that doesn't seem too out of scale however if they you know compound that with quite a bit of um you know items it can shift but we're starting to see that and we're also what's fascinating to me i don't know if you've picked this up but you know walmart is doing you know these amazing commercials really more touching that spirit of family and getting together really drying driving i would say kind of that subliminal message of, hey, it's time to get together as a group. Well, those things also spark, okay, well, if we're going to do that, we're going to spend. So the Dollar Trees, the Walmarts, more of those value-oriented where you can grab and go, little tabletop

accessories, et cetera. And then of course, on the grocery side for these dinners, the holiday dollars. It is kind of fascinating to see how these trends are shaping up as we approach the holiday season. Another thing that's sort of come to the forefront that I think investors think about as well as this idea of especially big retailers potentially discounting items as a means of kind of luring in inflation-weary customers. And of course, that makes sense from the business perspective, but there's also the fear of how could that impact the top and bottom line. So what are you seeing from your position right now? Yeah, that is definitely a concern. Now, there's a couple of things that have factored in. For

certain retailers, they may have overpurchased, and so they're still dealing with an oversupply. And in that scenario, these retailers really have to be mindful of the sequencing of discounting. So what I'm starting to notice and see, which I think is actually very different from prior years, it's not this call it fire sale of sorts, right? It's also not very sequenced and tied to holiday. What I mean by that is that you're seeing the retailers, you know, discounting at different periods of time, almost as though, you know, the consumer's not even aware when they may discount. So it's almost like a little bit of a surprise. And now that with all this technology that we have the ability to push notifications, the ability to kind of spark, oh, just exited my car.

I'm about to go into the grocery store and I get a notification that something I'm not even considering, you know, to buy, um, such as, Hey, do you remember you need, you may want to buy some, I don't know, pumpkin pie. Um, you know, and it's like, oh, oh, oh, it's a dollar off. Maybe I might do that. So I think that retailers are getting much more clever, if you want to call it, in how they ration out their discounts. So it's not tied purely to the Thanksgiving holiday and the Christmas. I think they're starting to really spread it out, which is helping them as it relates to how they're, you know, softly disposing of their oversupply. But yes, for those that, you know, they do not have the resources, the manpower, the

technology, et cetera, that may be a significant challenge. As we all know, you know, from an online perspective, you know, Amazon decided to have a second Prime Day and we were, I don't know if I was, I wasn't too surprised purely because of the oversupply. But nonetheless, I mean, it was still a significant, you know, clearing. I think they cleared somewhere around $5 billion in terms of inventory. So that's a lot of inventory. It's a lot. Yeah. And I'm sure it's, you know, it's somewhat a global perspective, but still, it's significant.

You know, when we spoke earlier this year, I kind of asked you a question along these lines, but I'm curious to hear how your answer may have changed at all. You know, what can you share about the changes that you're seeing in consumer spending preferences? How have those shifted? Do you think that these are permanent? So there are a few that I've seen in terms of, you know, people are really looking at, okay, my dollar and how I'm using that dollar and where I'm using it as it relates to quality of goods so in some situations you will start to see you know depending on you know your income right it's going to be very very different but I'm still seeing quite a bit of spend in you know the luxury space I'm monitoring that very closely

because I'm curious to see what it will look like come January as we continue to see the interest rates change and hike. And so I am watching that. So from a behavioral perspective, quality seems to be still important. And they're willing to spend a little extra for better quality. They're buying less of that better quality. We're still seeing quite a bit of spend on the resale. so people are being more open to buying uh on the resale market uh so i think we're going to continue to see there some of which is more related to sustainability um and that you know esg um and i think the other piece of it is also from a value perspective we are going to continue to see you know the challenges in um you know in those economic

areas where it is going to be very difficult for families to, you know, if we don't see macro economic changes, you know, with gas and so on and so forth, we will see those, you know, what I would say, a continuation of this kind of shift between, you know, people who have more to spend versus those that do not. So that spend, of course, is going to be on staple items. And my hope is that we'll try to figure out this balance between everything. But we're still seeing that spend occur. And the other thing we're seeing a big spend is those that are very focused on value shopping are spending more in fast food. And I don't know if you've noticed, but a lot of the fast food categories, the KFCs, the Taco Bells, the Yum! Brands, etc., they are benefiting from

it. They're seeing a nice increase in sales. However, these are dollar tacos. What's the health risks around that? That worries me, too. Whenever we see these, call it financial challenges, you know, the, uh, those that really struggle and suffer also those that also are potentially at high risk as it relates to, um, you know, what they're consuming, how they're consuming, et cetera. You know, as we draw to the end of our time together today, I think there's kind of one key question for, you know, for investors that are looking at the retail space right now that are looking at some of these companies and kind of different ways to play this landscape. What are some of the most prominent tailwinds or trends that you can

see as driving the retail landscape in 2023 and beyond? And how can we kind of track the health of this space? Sure, sure. I think it's really important to understand the strategy of a brand. What is that true omni-channel strategy that they are going to deploy? Remember, this is a partnership. And that partnership requires both sides, the investor side to understand the retailer and vice versa, right? If we can be transparent in that conversation early on, of course, it's not going to be 100%, but transparent, it becomes a partnership. So when there's some down days, one party helps. When there's some up days, the other party helps, right? And that can be done in so many ways, but financially,

both from that point of view, but also from a longevity point of view. And so, you know, what I mean by that is from a trend perspective, you're going to see more conversations as it relates to, you know, retailer. What is your strategy as you deploy that, that, you know, demand delivery?

How will you share that information? How are you looking at technology and technology as it relates to that specific store? is there an opportunity to share that information with the developer? Not to the point where we're going to be managing your business, but to the point where we can, again, look at how the success of your business can drive the success of us bringing in more like retailers to drive everyone's business up. So I think if we can have more of those conversations, I think it really behooves all of us into looking at retail, uh, continuing to see retail, um, elevate and, and, and become

even more healthier. Um, you know, there were a few clients I was speaking to the past few days, institutional clients that, you know, have become quite bullish again, as it relates to retail, um, you know, class a lifestyle, suburban, um, retail, because they are seeing, as I mentioned at the beginning of this discussion, this increased velocity as it relates to leasing. So retailers are having those appetites, as I mentioned, to expand more open to buys, but they're being very cautious. It's not certain retailers, it's not 100 stores. It might be 10 to 15 per year, but very, very strategic. So having that balance is going to really show and shed some success. So I think that omni-channel, that approach to how we're delivering, how we're

educating consumer, and that's going to continue to drive. I mean, I think you may have read or heard, the drone is out there and Walmart's droning your gifts. So it's not Santa, it's Walmart's drone that you'll see flying around here pretty soon. I'm not knocking the innovation of flying drones, but they got a long way before they catch up to the scope and scale of Santa's delivery system. Coming up after the break, Ron Gross and Jason Moser return with a couple of stocks on their radar, so stay right here. You're listening to Motley Fool Money. Chris Hill. 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 once again with Jason Moser and Ron Gross. Guys, been no shortage of consumer-facing companies raising prices this year, but where they raise prices and by how much can be a delicate art. Carnival Cruise Line announced that starting in January, they're raising prices on specialty dining restaurants on their cruise ships due to increased food costs and supply chain challenges. One of the increases caught the attention of producer Ricky Mulvey, guests will now be charged an additional $5 if they order

a third entree for lunch or dinner. Now, let's put aside just for a moment how hungry you have to be to consume two entire entrees at lunch or dinner and think to yourself, I think I'm going to need one more. But Ron, in terms of this move, is this helping Carnival Cruise lines balance sheet? If you're a shareholder, are you thinking, this is going to work? I think it will cut costs marginally. But listen, I took a cruise once, I liked the midnight bacon as much as the next time. But it's not healthy, and three entrees isn't healthy either, so maybe they're doing a public service to all of us by limiting our intake. But yes, I think it will cut costs. They're doing other things to their lobster

dinners and some other cost-cutting measures. On the margins, I think it will help. Jason, I don't know, I'm skeptical. I haven't been on a cruise in a very, very long time, but this just seems like one of those moves that, look, I get that it results in more money, but why wouldn't you just, I don't know, raise the overall price of the ticket rather than nickel and dime people looking for a third entree? You know, I've never been on a cruise. I don't really have a desire to go on a cruise. I share your skepticism. But really, what this all boils down to me is, if I ever start a band, I mean, I am totally going to name it Midnight Bacon. I mean, that is just a sure thing.

Feel free. I thought you were going to go third entree. That also seems like it could be. Third entree could open up for Midnight Bacon. Let's get to the stocks on our radar this week. Our man behind the glass, Dan Boyd, he's going to hit you with a question. Jason Moser, you're up first. What are you looking at this week? A stock that closed at $11.47 on November 8th, and now I'm watching it scratch $20 per share at the end of this week, Outset Medical, ticker OM. Remember, they make dialysis machines known for the Tableau dialysis machine that opens them up to not only acute care settings in hospitals and clinics, but also in-home settings. This was a really good quarter

they announced, raised guidance for the full year. And this really was the quarter where they've been able to put that whole FDA hold on Tableau machines from earlier in the year. They made it able to put that behind them. Remember, that was something where they were working with the FDA ultimately just to provide more data. It wasn't a question of the machines, but updates to the machines. They just wanted more data. The stock got hammered when that hold was placed. They got through it very quickly. And now it really does feel like they've just put this in the rearview mirror. That's why the stock has performed so well this week, because it really is pursuing a large market opportunity in dialysis in general. It's limited competition in the space.

They were awarded a VA contract, which enables them to be sold into 106 VA hospitals throughout the United States. All things considered, I think this is a business that is back on track. It's one I own shares in personally, and I'm excited to see how they develop. Dan, question about Outset Medical? Raising guidance, Jason? You never hear about that happening anymore. Unheard of in this market. Unheard of, Dan, and that's why I think the market is reacting so positively to that news. In all seriousness, that caught my attention as well, because I just thought, wow, Now, we've been saying all year, this is not the time nor the place to be overly aggressive

with guidance. Definitely something that's worth watching. Ron Gross, what are you looking at this week? Ron Gross, an update for long-time listeners on Titan International. TWI, a stock I've held and at times sold for a long time. Manufacturer of wheels and tires for agricultural and industrial equipment. Shares are up almost 40% this year. That's even after falling 20% from their 52-week highs, so not that normal to see a stock up that much in this environment. Still a very small company with a market cap of only about $960 million. The company is probably in the strongest position they've been in quite a while. In this latest quarter, sales were up 18%, gross margins and operating

margins widened. Operating income was up 120%. Free cash flow was $40 million for the quarter, almost $70 million year-to-date. They reduced their debt by $35 million in the quarter, improving their debt leverage ratios significantly. Management expects adjusted EBITDA of around $250 million for this year, with free cash flow for the year to be at $100 million or more. That puts the stock at only five times EBITDA. EBITDA is a quick and dirty measure of cash flow. I'm thinking we have at least 30% upside left in the stock. Stock's around 15%. I think it goes to the 20s or perhaps even the low 20s. That's around where I've sold some in the past. I think Titan is doing a great job. Recession is always the wild card. A slowing economy, slowing agricultural

market is always a wild card, but I think they look really strong right here. dan question about titan international i'm just glad that old economy ron showed up here on friday and molly full money i miss him just for you dan what do you want to add to your watch list dan that's a tough one chris because i mean titan continuously impresses and they just make wheels like that's like they're just making wheels out there they're not reinventing them I was going to say, don't you feel like they're reinventing the wheel? They do. They have some technology out there that you could argue is reinventing the wheel.

But isn't that a bull? Isn't that part of the bull case for this company? Who in the world needs to reinvent the wheel? That shows how solid their competitive position is, right? I guess so. So that's why I'm picking Titan, Chris. No. Jason Moser, Ron Gross, guys.

We'll see you next time. We'll be right back.