Motley Fool Hidden Gems Investing - You Can’t Tariff Love

Episode Date: April 3, 2025

The markets are taking a beating on Liberation Day tariff announcements. What do the announcements mean long term? It’s anyone’s guess. (00:21) Nick Sciple and Ricky Mulvey discuss: - Why markets are reacting so strongly to the reciprocal tariff announcements. - How investors can look for opportunities, but “not be a hero” right now. - Match Group’s new artificial intelligence flirting game. Then, (17:24) Rick Munarriz joins Ricky for a conversation about Nintendo’s new Switch 2, and how the device could boost earnings for the video game maker. Companies discussed: WINA, MTCH, OTC: NTDOY Host: Ricky Mulvey Guests: Nick Sciple, Rick Munnariz Producer: Mary Long Engineer: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

It's the chart that shook markets. You're listening to Motley Fool Money. Tariff Liberation Day has arrived. And so has Nick Seipel. Nick, thank you for being here on this tumultuous day for stock investors. Great to be here with you, Ricky. I wish it was with more fun news, but hey, we'll take the news we've got. President Donald Trump announcing reciprocal tariffs. I think he called them kind reciprocal tariffs. Tough love, as it is half of what's going on on the other side of the chart on more than 180 countries. These rates also include effects of currency manipulation and trade barriers from other countries, non-monetary trade barriers. We'll get into the X's and O's

of what happened at the announcement yesterday. But first, did you look at your stocks this morning? Did you take a look? Did you take a look at the old Nick Seipel portfolio? How can you not, right? I mean, it's like driving by a car crash. You got to see what's going on. And it's certainly ugly in my portfolio, like I'm sure it is for many others, with broader indexes down as much as 4% or the Russell small cap index down over 5%. Really not many places to hide out there in the market today. Haven't done a lot of trading, did buy a small starter position in a recent Stock Advisor Canada recommendation that got whacked. And I think it already kind of been whacked, but nothing super meaningful for the

portfolio. I do think days like today are good ones to step away from the market, not just stare at your portfolio and watch the numbers go down. And I don't think it's a great time to try to be a hero and call a bottom and make big changes in your portfolio. Just take it on the chin and keep on ticking. It's okay to look away. I looked this morning, took a breath, made my breakfast, and then dove into some trade barriers reports for the show. I'm glad I needed a show to get ready for, so I wasn't like, ugh, this is bad. Markets knew this day was coming for a while. We talked about Tariff Liberation Day quite a bit on this show.

This was no secret. Trump campaigned on it. Once the charts came out, though, the traders really didn't like what they saw. Why do you think the market has reacted so strongly to these reciprocal tariff announcements, the kind reciprocal tariff announcements, to put it in Trump language? Yeah, I think the market expected tariffs, but they didn't expect them to be as large and broad reaching as they ended up being, a 10% baseline on everybody. And some of the big numbers, China now facing 54% tariffs, up on top of the 20% that we already had in place. And I

think where a lot of folks thought they might stay, if you look at Southeast Asian countries like Vietnam, Thailand, Malaysia, those are the places where lots of retailers and consumer good companies had been reshaking their supply chain to try to get production into those markets to avoid those Chinese tariffs. And now those places are subject to tariffs anyway. So much for all the work you tried to do, try to avoid tariffs. They're still going to come for you anyway. And that's without getting into the broader inflationary impacts, what it can mean for consumer spending. If this is something that really changes the way countries engage in trade with each other, if there's reciprocal tariffs back from other countries, there's just lots of

uncertainty out there in the market. And even the things that we kind of expected were even worse than I think we have been baking in. I also think market's starting to believe that tariffs could be longer lasting than expected rather than just a negotiating tactic. We'll see. It's all subject to change. And I think the uncertainty is probably the worst part of all of this is that it's hard for market participants to get clarity on where things are moving next. So this is an idea that I've been wrestling with for a little bit. Investing was not supposed to be political. I used to work at a financial advising company on their radio show, and there was this chart that a lot of financial planning firms like to trot out that shows market returns under

Democratic presidents and Republican presidents, and the idea is it doesn't really matter who's in office. The market is bigger than whoever the president is. Starting to think that that's changing. I think that it is becoming increasingly difficult, maybe even impossible, to separate your political ideas from your investing philosophy. If you own Tesla stock right now, there's a political idea behind that. If you're short Tesla stock right now, there's a political idea behind that.

And if you're watching the announcements yesterday, you may think that this is going to lead to a renaissance in American manufacturing and that the lowered income tax rates, lowered corporate tax rates will more than make up for the trade tariffs that are coming from the Trump administration. Or you might think that a global trade war is going to be materially destructive to the American economy and the macro economy, the world at large. All of that is to say, that's a long windup for this question. Has investing become political? I wouldn't say that investing is any more political than it's ever been. I think we should separate it into two buckets. I don't

think investing should be political in the sense that I don't think you should be buying or selling stock in a car company based on the political stance you think the brand or its management represents, especially when that can change really quickly. There's a different group of people buying and selling Tesla stock for political reasons than there were five years ago. And I just don't think that's a great way to make decisions. However, you should base your investing and your expectations about companies on how the world is today and how the world is likely to change in the future. And the political environment is always a part of that. And it's always going to be part of how you analyze the world that a company has to operate in.

I think we're super comfortable having that conversation when we're talking about Chinese companies or a company that's based in South America or someplace outside of the U.S., but it's just as real for companies in the United States. And we've seen it in the past when you look at changes in taxes or the regulatory environment. Now, obviously, we're seeing it with tariffs. You could argue, and I think you could win that argument, that the U.S. has been among the lowest political risk jurisdictions in the world. But to your point, you could also make the argument that maybe that's changing and that difference in political risk between the U.S. and other countries is not quite as stark as it was in the past. Again, all this is subject to change.

We could be back here next year and this tariff thing could have been behind us and it was just a negotiating tactic. We'll see. But anytime you invest, you're implicitly making some predictions or using some expectations about what you think the political environment will be, the regulatory environment, the tax environment will be for the companies you're investing in. And that is always subject to change. We're just reminded of it in times when it does. All right. Here's the part where I pull back the curtain a little bit. Here's where I'm at right now.

I'm trying to think about this stuff, and it's difficult. It's complicated. It's messy. I want the government to promote American enterprise. I want the American government to stand up against unfair trade practices. Canada imposing more than a 200% tariff on American butter if it's above a certain quota. That's not right. We got to slow that down. I'm looking at the report where Laotian presidential decree raised excise taxes on six categories of products selling gasoline vehicles, meaning if you got a big gasoline engine, you're subject to a tax rate of 220%. That's not right. And I'm also glad to see that American government leaders are thinking about and potentially taking real actions to

reduce the national debt. I'm in my late 20s. That's a real problem. And especially as I get older, that can create real long-term economic problems for our economy. It already has. But I'm also thinking, I think it's a bad idea to maybe impose economic sanctions on 180 countries at one time. You're a WWE fan. This is the Royal Rumble approach to economic sanctions. Maybe it's better to go after a couple. Figure out a couple things versus everybody at once, and then you create a common enemy for the entire world to gang up on you, and then create problems and outcomes that you may not expect. All of that is to say, there's a lot of stuff I agree with, but the practice is something where

I have a lot of issues with it. And I think it can create bad outcomes for the market flooding the zone. It's been a great strategy for the Trump administration on media, on political parties. We're going to flood the zone with so many things. You can't keep up with what we're doing and we're going to push through the things we want. Maybe that doesn't work as well with foreign actors though, especially when they can collectively go after you on one thing. I don't know. That's a word salad. What do you think? Where are you at on all this? I don't really have a strong opinion. We'll see what happens. You laid out a lot of the game theory here. The U.S. does one thing. What can we expect that other countries will do? How

will they react? Will folks come to the table and we get dealmaking? Or do we see, as we've seen in the past, where there will be escalating tariffs back and forth between countries? And depending on how things go and what those knock-on effects are, we'll determine whether or not this is a strategy. This is not a game you get to play over and over again. You only get to play it once. I think it is certain that in the near term, there's going to be some pain. Whether or not there's any long-term game is going to shape the political will of the country going forward and whether the same people will be making decisions two and four years from now. And that's how the system works. And it'll to be determined how popular it will be and how successful it will be. But we're

seeing the effects in real time. If you've got long-form thoughts on this, and hopefully you've got arguments made in good faith, you can always email us at podcasts at fool.com. That's podcasts with an S at fool.com. One of the categories getting caught up by this, you mentioned Vietnam earlier where a lot of clothes are made. It is every retailer getting hammered today. It seems like because I'm looking for opportunities on behalf of the listener, I did not make this stock purchase today, but here's one that makes absolutely no sense to me. And that is a foolish favorite, Winmark. It is a retailer, retail franchisor of gently used clothing, sports equipment, even musical instruments. Play-Doh's Closet, Play It Again Sports. The stock is down

8% today because retailers are getting hammered. But here's the thing. They sell used equipment. They're not manufacturing things. And you would think that if people are buying fewer new clothes, this could actually benefit a company like Winmark. But it is being swept up in all of this tide. If I weren't talking about it on the show, if I weren't telling listeners, I'd probably pick up a couple of shares. I already have a position. But it seems like this could be a buying opportunity. I don't know. I know this is a company you follow. Seems like now would be a good time to sell used clothing in the United States. Sure. I mean, I think this is definitely an example of a company getting caught up with the broader selling in retail. This isn't a company

that's manufacturing goods in foreign countries and importing them. Actually, their customers bring their goods right into the store and sell them to them. And when Mark will buy them for a dollar, sell them back to other customers that are $3. It's really a beautiful business model that's really agnostic to inflation when it comes to the underlying goods. You just keep your spread the same. I think, Winmark, maybe there's an opportunity there. If there really is a high quality company out there that you know well and you've got some cash laying around, now could be a time to nibble a little bit. As I said earlier, I don't think it's time to go out here and be a hero. I think a pretty high likelihood that in this consumer product retail area, especially if

tariffs aren't ultra-long-lasting, that the prices that you see today in the market could look pretty silly here a year from now. I want to do another story. But anything else on tariff day you want to hit before you move on? There's 180 tariffs. Do you maybe have a personal favorite? No personal favorite in the tariffs. I do think it is noteworthy what's not included. Big carve-outs for all energy imports. They're already carved out in the Canada and Mexico tariffs also now carved out for just about everybody. Also, carve-outs for important commodities, uranium, it's important for the nuclear industry, things like that. Maybe that tells you something about, I guess, the administration's thoughts on the ability to

influence those commodities. It also just maybe tells about areas that were more sensitive to potential inflation in them. We'll see where these tariffs go. Remember, all of this is subject to change. Hopefully, this is the peak of the uncertainty here today. Let us remember Trump likes to make deals. You can imagine there may be some foreign leaders that would like to say, hey, we're going to hit back as hard as we can, and that could create a trade spat. You could also have a foreign leader that goes to Mr. Trump, like the late Shinzo Abe that says, sir, no one has seen this before you, and we were able to get away with it for so long, but you know what? You caught us, and we're ready to work together. We're ready to lower trade

barriers because we want access to your big, beautiful country. Let's move on. Nick, there's no clean segue for this, but there's another story I wanted to talk to you about. And that is Match Group just struggling to get back to growth. The decline began in 2023 for this company and management told investors, basically, if you believe in Hinge and Tinder, do not expect growth until 2027. But in the meantime, they do have a solution, Nick. And that is an in-app game. More bots on dating apps this is a game where users can flirt with ai bots according to bloomberg users can accumulate points for warmth and curiosity receive real-time feedback on their responses and ultimately win the game if the ai character verbally agrees to a date here's the

catch plays are limited to five per day and about three minutes at a time you better get to that date quickly so i know you're married with children but i'm gonna take you back to your single days. Are you, are you ready to play this game? Do you want to flirt with some AI bots for points? You know, not going to be for me, uh, Ricky, more of a college football video game, uh, guy myself, you know, maybe in the age of AI, the Gen Z and Gen Alpha are gonna, are gonna, uh, you know, chat it up in a different way, but, uh, I prefer to do my flirting in real life. There is a surprising amount of people who are interested in AI girlfriends. It is, uh, not good. And it makes me very sad to think about the longer I think about it,

but this is a business show. Is this game how Match gets back to growth? Well, they've got to do something. Just changed the CEO at Match Group, former CEO at Zillow, Spencer Raskoff, has joined the company under the previous CEO, Bernard Kim. Companies talked for past few years about ways it could reinvigorate payer growth at Tinder, and it just hasn't happened. That said, Hinge continues to grow rapidly, and Tinder historically has been able to increase monetization on the users that it has. It is a very cashflow-generative business. Management has, though, pledged to prioritize user experience over monetization in the near term, which is going to hurt growth when it comes to revenue, but hopefully can return payers to

growth. Match is really a company that has been in a turnaround for the past few years. There are some concerns that maybe the interest in online dating isn't as high as it was a couple years ago. Running clubs are the new hip way to meet somebody, somebody to date out there. But Match Group is still a business that generates lots of cash flow and management's going to try what they can to generate the growth that they can. You know, Algeria can tariff concrete. Japan can tariff cars. We can tariff a lot of things back. But you know what you can't tariff, Nick? You can't tariff love. You can't tariff love. And Match Group right here trades at about 14 times earnings. On the historically lower side, management at the same time seems to

be aggressively repurchasing shares. I believe last year it was above $700 million in share repurchases. This is a mid-ish small cap company. That ain't nothing. It'll also pay about a 2.5% dividend to wait. There's a lot of negative sentiment about this company. You mentioned running groups. People are getting tired of dating apps. Yeah, but the people who are tired dating apps. We're also still on dating apps. There's a lot of people rotating in, even though there's a high churn. All of this is to ask. When you're looking at Match Group here, we've seen a value play, value trap, wait and see. What do you think? I own some shares. I've owned it all the way from growth stock all the way to value stock.

I do think it looks cheap here. Right now, we're in an environment, as you say, where the company is returning all the cash it generates back to shareholders, bringing down its share share count over time, just approved a $1.5 billion share repurchase program back in December. This is a company that has a $10 billion enterprise value and about a $7 billion market cap. So, I mean, that's a pretty chunky buyback if they're able to kind of carry it all through at current prices. Long-term, I think, or at least medium-term, I think this is a company that's had some issues on the public market that I think is probably going to end up going private. They've got some debt come due the next couple of years that they're going to

need to refinance, generates lots of cash. I think this is the type of company that makes sense in a private portfolio. And given the valuation in the public market, I think that's how it ends up exiting. And selfishly, as a shareholder who's had a really tough journey with this stock, I wouldn't mind having it taken away from me at a higher price than it trades out. We've got plenty more to talk about, but we'll leave it there. Tariff news and chunky buybacks, that's a good place to end it. Nick Seipel, thanks for being here. Appreciate your time and your insight. Anytime, Ricky. up next we've got another big announcement from yesterday nintendo it announced its first new

device since 2017 motley fool contributor rick muneris joined me to discuss the state of nintendo in the new switch to nintendo announced its first new device since 2017 the switch to yesterday morning and rick this is a massive bet for the video game giant, especially since the first Switch device generated about $100 billion in sales for the video game maker. So before we get started, I know you watched the announcement. Are you going to buy the Switch 2? Short answer, yes. Long answer, absolutely, yes. I've owned Nintendo consoles since even back to the game and clock days, back in the early 1980s, before they even had a console, I picked up some Nintendo devices. So

I'd have to add it to my collection. Of course, my children now, adult children, they still play Nintendo. So it's a given. I'm in. One of the questions that observers were asking is what's going to make someone buy the new Switch? And one of the answers, well, a few answers from Nintendo, better graphics, new games, and also your friends are going to be there. So basically there's going to be a new built-in microphone that can share the screen with friends while playing games. And it also has this like separately sold camera so you can appear on screen while you're playing much like people who stream on twitch and youtube i thought that was probably the biggest innovation biggest

announcement from this morning but how about you what were your big takeaways from the switch to announcement that definitely was one of them and when they had the teaser out a couple months ago there was like the c button on the controller saying what is that is that connect is that cast uh is that chat and it's all three really so yeah and another usbc charge of the world about that Yeah, that's where you can plug in the optional camera. So, not only can you speak with the microphone, you can also be visually seeing your family and your friends as you play and stream and do all these things that they do on other consoles.

So, I think it's a very important part of the whole thing. But again, the specs are nice. And obviously, whenever Nintendo, and it's been eight years, eight years since a new Nintendo console came out, it has never taken this long since they've been in the console game for 40 years now. So, obviously, every little thing is going to be watched. And yes, it's a little bigger now. there's a lot of cool features like like you can actually share with one game you can play with a

couple friends that wasn't the case before there's a virtual game card platform that's also rolling out to make it easier just make it more portable so there are a lot of neat little features not just looking better on your tv there's just a lot of cool little features that i think will make people pay up the much higher price now it's it's 450 versus 299 for the last generation eight years ago so it is it is a price hike but i think people will pay up and there's eventually a streaming subscription component if you want to continue to be able to talk to your friends that kicks in in March of 2026. So the device comes with a free service subscription, and then you got to pay up. There is this article before the announcement in Bloomberg, an opinion piece, basically saying

that Nintendo needs this to be a hit. Yes, it's had the GameCube. It's also had the Wii U in addition to the Wii, which was a handhold device that seemed to be quickly forgotten by Nintendo players. All in all, this was an announcement that a lot of folks were waiting for. It sounds like you think the Switch 2 is going to be a massive hit for Nintendo. I think so. They don't waste people's time when they roll out a new console. They try to be revolutionary, not evolutionary. So when they put something out, it's the kind of thing where, hey, they're doing something a little different. And while this is Switch 2, just like Wii U was sort of like a step up from the original Wii, you do see this whole ecosystem when Nintendo comes out,

that a new system comes out three years later, sales and software sales and console sales, everything is sort of just peaking at that point. The fact that we're now at the lower part of this upgrade cycle is very important right now. This does need to be a hit, because the stock has already been moving higher just the past couple of years, despite the fact that revenue and profitability has declined during the last part of the original Switch cycle, upgrade cycle. Yeah, you mentioned the upgrade cycle. What is Nintendo's playbook here from past device releases, such as the GameCube, the first Switch? We'll even count the Wii in there. Yeah, so they obviously try to do something a little different, but I think what's really

important here is, and this is what we didn't know, we sort of assumed there'd be title exclusivity. So, there's a new Donkey Kong game, and there hasn't been a new Donkey Kong 3D game since the old N64 days. So, it's been something that a lot of people are waiting for. But I think the most important thing here is right now, there's going to be Mario Kart World. It's been eight years since the original Mario Kart 8 came out, sold 67 million copies over the past eight years. So, clearly, a big franchise title. And these are exclusive to Switch, too. So, if you have the Switch, if you have an old Wii and you're playing all these other games, you're going to need to upgrade if you want to join all your friends that are now playing the

same game that they're all playing as they will come June and beyond when the system comes out. Yeah. One of the appeals of Mario cart world is apparently you can drive off the track and then just adventure out. I don't know what that entails or how appealing that is to gamers, but if you want to go Mario, who knows, who knows if you want to go on aimless drives throughout the Mario cart universe, then you will be able to do that with Mario cart world. There's a larger trend in, in video games that has affected a lot of video game manufacturers. And that's that video gamers like to play the hits. You mentioned Mario Kart 8. That came out a decade ago and sold 8 million copies last year. The Switch 2 seems to be trying to combat this by including older entries

in franchises, including Street Fighter, Final Fantasy. You cannot play those on the regular Switch. You can play them on the Switch 2. But Nintendo is always trying to sell new games. It's always trying to innovate. And yet, there is a demand from gamers to play the oldies. What does that trend mean for Nintendo now in 2025? I am not a young man, but I grew up in college, in high school, playing the old 8-bit Nintendo, then 16, then 64-bit Nintendos. So, by getting out there, reaching out, like GameCube compatibility, which is something that no one thought would... Do you even remember the GameCube cycle? I do. A lot of gamers do. And being able to play all these old games, an updated version of these games, do reach out to a wider audience than just

the young gamers and the early adopters. Some of us that were early adopters decades ago, are going to be onto this. And I think it's going to be selling that way. I think that's going to help. Nintendo also has a partnership with Universal Studios and Comcast to open Super Nintendo Worlds at their theme parks. We'll move away from the device release, as Nintendo has other things going on. Movies, theme parks. The theme parks, I know, is something you pay attention to. But what are these lands, these Super Nintendo lands, coming to Epic Universe, close to you in Orlando, also open in Japan. I believe it's also coming to California. What do these lands mean for Nintendo? Yeah, Epic Universe opens next month, May 22nd. We have

opened Universal Studios Hollywood back in 2022. It opened in Osaka in Japan, Universal Studios Japan as well. Those three parks draw about 35 million guests a year. And this gives Nintendo year-round access to tens of millions of people to their brand. And it's not just licensing and merchandising revenue, which obviously it will happen. I've been to Universal Studios Hollywood three times. I had no reason to go until they opened Super Nintendo World three years ago. but you get there and everyone's at the park but in super nintendo world it's a different level where everyone's playing games and that's a tiny little version of it the new one in epic universe is gonna have three times the rides and because of that there's going to be more engagement and

just nintendo when they release something a new game a new title a new anything you'll have right there the perfect platform for it so i think that this is going to be a great way to extend the brand beyond gamers and also give year-round access not just when there's a new shiny system out there. People are going to be sending money to Nintendo all year long now at this point. It looks pretty sweet. They got a Donkey Kong mine cart madness ride where they have it basically the illusion of going on and off track that looks pretty cool. And I can imagine people like going there. Looks a little crowded. Looks a little crowded. I got to be honest. You said it's a different level. Theme parks, Universal Studios crowded to begin with. Once you close them into

Super Nintendo Land, that sounds a little claustrophobic. We'll get back to the stock. Nintendo is a pure play. It's the largest video game company by market cap. You mentioned that it's cyclical. Right now, the stock's also at a high. It's an $80 billion market cap. We'll split this question in two parts. First is, does it deserve that kind of valuation? And then also, for investors, are they buying a cyclical company at a high point if they're putting money in Nintendo stock? At $80 billion, it's basically trading for almost 40 times trailing earnings, almost nearly 10 times trailing sales. So, a very high multiple for a stock that you would think is where revenue and earnings have sort of been declining the last

couple of years. But this is the most exciting thing about Nintendo when a new system comes out. When the Wii came out in 2006 and when the Switch came out in 2017, their revenue and their earnings three to four years later had more than tripled, and in some cases quadrupled, if not a little more than quadrupled in just three or four years. So, while the valuation is high right now, you have a company here that, if the system works, if it gets people to upgrade, and again, right now we're talking about a system that's priced 50% more. Just the console itself is 50% more. Games are now a little more expensive than they were in 2017. So, the potential for an increase, your dramatic increase, is there. And I think that's why Nintendo has been moving higher,

despite the fact that its fundamentals haven't been keeping up with the stock price, because you have a system where the system is proven. It didn't really happen at the Wii U, and I think that's important. It doesn't happen in every cycle. But if we get another Wii or a Switch, the original Switch cycle to happen here, it's going to be a very good three, four years for growth for Nintendo. So, I'll just add as we close out, one of my favorite things watching Nintendo releases is they do this sort of Blue's Clues style question asking directly to the audience. You know, they'll show a preview of the Mario Kart game and say, what do you think will happen next and then give it a pause and then they'll show you more about the mario kart thing

if any other company did it it would be insulting but with nintendo i find it endearing for whatever reason i like that detail as we wrap up anything else on nintendo little big small medium size that you want to hit yeah it's not just the theme parks obviously we know the console let's talk the movies obviously the super mario brothers movie was the second highest grossing movie worldwide in 2023 there's another sequel jack black chris pratt they're all back for a sequel that comes out in 2026. And there is a Legend of Zelda movie in development. So if this is going to become the next franchise that actually becomes cinematic, and I don't mean the Marvel Cinematic Universe, but just something that becomes that kind of dramatic, this is a company that will

be more than just a video game with theme parks, movies, all these things that maybe didn't work out initially back when the first Super Mario movie came out a millennium ago. But I think that now it's going to be working well for them. And I think it's a much more diversified company, been profitable through the ups and downs of the cycles, but imagine now with a much higher price console, people willing to pay more for games, new features that make it stickier, and engagement ideally going higher. I think that the future is very bright for Nintendo as an investment, and especially as a company. Omnichannel, word of the day. We'll leave it there. Rick Moneris, appreciate you being here. Thank you for your time and your insight. Thank you.

As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. The Motley Fool only picks products that it would personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow. Thank you.