Motley Fool Money - Amazon and Disney See Ad Dollars

Episode Date: January 10, 2025

Disney’s streaming numbers show ad-supported tiers are a hit with consumers, and Amazon takes aim at the approach that made Google’s ad business ubiquitous online. (00:39) Ron Gross and Jason Moser discuss: - What the December Fed minutes, latest jobs numbers, and final holiday shopping figures say about the big picture. - The first look at Disney’s ad-supported streaming numbers, Amazon’s plans to come after Google’s ad turf, and Meta’s changes to its content moderation policies. (19:03) Dave Meyer – head of real estate investing at Bigger Pockets – talks Matt Argersinger through the state of real estate and the markets he’s watching in 2025. (33:43) Ron and Jason break down two stocks on their radar: Paylocity and Gannett. Listeners, you can become a member of Stock Advisor at Fool.com/signup Stocks discussed: DAL, DIS, META, GOOG, GOOGL, AMZN, ADBE, GCI, PCTY Host: Dylan Lewis Guests: Jason Moser, Ron Gross, Dave Meyer, Matt Argersinger Engineers: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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We're checking in on the big macro. and the state of real estate. This week's Motley Fool Money Radio show starts now. That's why they call it money. The best thing. Cool Global headquarters, this is Motley Fool Money Radio show. I'm Dylan Lewis. Joining me over the Airwaves, Motley Fool's senior analyst,

Jason Moser and Ron Gross. Fools, as always, great to have you here. Hey, hey. How are you doing, Dylan? I'm doing great. We're putting a bow on the holiday shopping season. We're going to be checking in on what to expect from the real estate market in 2025.

And of course, you guys are bringing your stocks on your radar. later on in the show. But first up, our first look at the big macro for 2025. This week, we got the minutes from the Fed's latest meeting in December, adding a little bit of fuel to FedWatch 2025. Ron, what is the outlook right now? It's a little dicey, Dylan. I think what the weak stock market has been telling us lately is that we still actually may have an inflation problem. After all of the soft landing talk, Friday's job report appears to, perhaps confirm that. And I think on Friday, quite frankly, the market was also reacting to the ongoing wildfire tragedies in California with both human and economic impacts being considered,

and certainly our hearts go out to all involved there. It really is a tragedy. I'm going to circle back to Friday's job report in a minute, but let me just provide some general context first. Earlier in the week, investors digested the minutes from the Fed's December meeting where officials basically said that the pace of interest rate cuts would slow this year as a result of what we see as lingering inflation and also the impact of some of Trump's trade and immigration policies, which we don't really know how they're going to play out yet and what impacts they're going to have. So that scenario has all but done away with the hope that the Fed will cut interest rates again before the middle of the year. And of course the markets do not like that.

Treasury, 10-year treasuries jumped to 4.7 percent highest since April. And we have a said the economy is actually growing too quickly, and the markets don't like that. Now, on Friday, back to the jobs report, the market was hoping for a weak jobs report to say things are finally calming down. We got the opposite, with 256,000 jobs created much more than expected, with unemployment ticking down to 4.1%. Wages grew slightly less than expected, so bad for workers, but somewhat good for the inflation story, and the 10-year treasury yield jumped again. to 4.77%. That's the highest since 2023. So the markets are shaky right now. Inflation seems to be persisting. Job market is strong and interest rates don't look like they're

coming down from the Fed anytime soon. So, Ron, it sounds like you are pausing that appointment for the soft landing tattoo that you had been planning all of 2024. I'm optimistic. I remain optimistic about the economy. I think we're going to be just fine. Jason, Ron, just gave us a great rundown. anything that you want to zoom into there? Well, I just, you know, you can be forgiven if you're new to the investing world. And you would think that a good jobs report would bode well for strong results and a positive outlook. Everybody's glass have full. And lo and behold, we get this market sell off. I mean, Ron, really, I think at the nail on the head there, this is about interest rates.

It's about inflation. You would think a report like this would be cheered because it portends economic growth, growing corporate profits. But, you know, this one kind of comes back to what are they going to do about interest rates? We're in this sort of twilight zone regarding interest rates right now. And as Ron mentioned, with the Fed, it seems like they are all on board with feeling like inflation hasn't quite fully been defeated yet. So, time will tell. But yeah, this is volatile time. All right. The Fed Minutes, not the only information from December that we're catching up on. We've also got the final tally for online retail activity for the holidays from our friends over

at Adobe. The sticker figure, $241 billion in online holiday spend between November 1st and December 31st, up about 8 percent over 2023. Jason, did you do your part to help push the numbers higher this year? Well, we definitely did our part, right? It was a great holiday season. I hope everyone had a wonderful holiday season. Again, pointing toward, you know, pointed to that strong economic growth thing. I mean, there were a lot of positive takeaways from this report. Like you mentioned there in regard to total online retail spend, I mean, up up 8.7% from a year ago. That's strong, considering we've been talking a lot about the state of the consumer lately. I think very encouraging. We saw mobile gain share representing now 54.5% of total spend coming from mobile devices.

And, you know, we gave it a hard time in the early days, but buy and out pay later is it's, It's establishing itself as another tool for consumers to use. BNPL had another good year. It represented just over $18 billion of total spend versus $16.6 billion a year ago. Now, a point made in the report that will be worth following as earnings season starts roll out here. There was stronger than expected discounting. So while we always pay attention to margins in these retail numbers, I think that will be even more of the case here this coming earnings season.

We'll pay very close attention to what those margins look like. And I think we should, whenever we talk about a strong consumer, the first thing that comes to my mind is let's keep an eye on credit card debt and let's keep an eye on savings balances perhaps being drawn down because that will have repercussions down the road. I don't know where we'll shake out on that yet, but they always go hand in hand to me. I'm happy to see strong numbers, but let's see how consumers funded those expenditures. Looking through Adobe's report, one of the things that jumped out to me was they identify some of the hottest segments. on some of the biggest shopping days. Looking at Black Friday in particular, this year, makeup and the skincare category was an incredibly hot seller.

Jason, I'm guessing that bodes well for a company like Ulta. It does. I mean, we've talked about it a lot with Alta. I mean, it's a long-time wreck in the Foolish universe, and it's partly because that cosmetics and makeup market opportunity, that's just such a resilient one, even through difficult times. It still does okay. And we saw Alta this week.

make a couple of announcements. They have a new CEO. Dave, Dave Kimball has stepped down and the former C.O.O. of the company, Kesea Stilman is taking his place. She's been with the company for, I think, about 10 years now. Yeah, she was the C.O. Since June 2021. So she seems like a very natural fit to take that to take that role. And then along with that announcement, they also announced, they raised their guidance for the holiday quarter just a little bit, just stronger numbers based on stronger traffic and stronger spending and that kind of ties back with what you were just mentioning there in the report. We'll see how all that winds up flowing through to retail earnings over the next couple weeks and months. But if you are hungry for earnings results, don't worry, Delta is here to get the party started this earnings season.

Ron, this was what looked like an incredibly strong report. The market reacted incredibly positively to it. Shares up 10% today. And on a very week Friday, so, you know, that's hard to do. But the report, backs that up. They reported their best ever annual revenue, and CEO Ad Bastion sees the momentum carrying into 2025. He added, we're seeing growth in the corporate space, double-digit growth in corporate bookings. We're seeing the international area showing very healthy growth. So that portends well for the next year or so. Revenue growth up 5.7% on acceleration in demand. That was versus guidance of only 2 to 4%. So a nice beat there. They have a diversified revenue base, as many airlines do now, led by premium and loyalty.

That was 57% of revenue in 2024, so that's been moving up nicely. All three international geographies improve sequentially and relative to expectations. So that's strong. Corporate sales up 10%. So you have really on the revenue side, things look quite strong. And now on the margin side, cost controls perhaps even better. Operating margins widened to 12% from 9%. point seven percent and they generated a pre-tax income of 1.6 billion up 500 million from last year.

And they raise guidance. They see $4 billion or more free cash flow in 2025. Their investment grade debt, all three credit agencies now have them as investment grade. So they've been really focusing on the balance sheet. So things look like they're going pretty well for Delta. Only trading nine times forward earnings. So not necessarily expensive. That is where airlines trade. But I certainly wouldn't call the stock expensive here. Ron, Delta is on the early side when it comes to reporting earnings and quarterly results. They are one of the better providers in the airline industry right now. Based on what you're seeing, how do you think it portends for some of the others that

will report over the next couple weeks? United was up to on Friday in response. I think people are looking for good numbers from them as well. Southwest has really been struggling. Southwest had 20 times earnings because those earnings are so depressed right now versus somewhere like seven to nine for the rest of the industry. Let's keep an eye on Southwest and see if they can turn the corner. All right. Coming up after the break, Amazon's got its eyes on Alphabet's Cash Cow. Stay right here. You're listening to Motleyful Money. Welcome back to Motleyful

Money. I'm Dylan Lewis here on air with Jason Moser and Ron Gross. We're going to spend a little time surveying the advertising landscape today because we have a few stories that are getting at some of the different shifting dynamics there. I want to kick us off with Disney. The House of Mouse giving its first look at total ad-supported users this week. Across Disney Plus, Hulu, and ESPN Plus, 157 million users globally have opted for their ad-supported tiers. Jason, meet the new boss, same as the old boss, advertising. Yeah, it all kind of has come full circle, hasn't it, Dylan?

I mean, we're basically back to where we started decades-plus ago with just watching TV with commercials. I mean, granted, it's a little bit more user-friendly with the internet TV, obviously, and things that are more on-demand. But what we've seen here through and through is that advertising continues to rule the day. And these companies, Disney and others, they've just done a very good job of creating value. They're saying, hey, listen, if you don't want to pay for an ad-free subscription, well, we've got this tier for you that's going to have some ads in it. It's going to be a cheaper tier. And honestly, they want to push more of those ad subscriptions because over the longer haul, they can be more lucrative.

This made me think immediately of Netflix. So with those numbers that Disney reported, you know, Netflix ad supported tier that now reaches 70 million users around the globe. That's versus 40 million they reported in May. And I think like 22 million at the beginning of the year. So it's not just Disney that witnessed a lot of this fantastic growth, right? I mean, Netflix and others are feeling the same. It's interesting to hear you mention the upside there because if we rewind to Disney's last earnings call, management noted that the average revenue per user for their Disney Plus subscribers actually went down. And that was because a lot of people were opting for this ad-supported plan, and those were a little bit less lucrative for them right now.

Ron, when you look at this, we have seen plenty of times where businesses have had to pivot a little bit, and it's done some weird things to some of their core metrics. Is this one of those things that you're saying, okay, we're willing to stomach what might be some bumpiness in a core metric here because we think the long-term opportunity is better for Disney's monetization? Yep, I think you nailed that. I think that's basically the strategy. I think we're seeing some streaming fatigue. I think the numbers bear that out. Consumers in general just have too many streaming services and they're too expensive. So they're looking to offload some of them. They're looking to pay less for others. streamers have to adapt to that. I think we're seeing Disney do that. As far as the stock goes, don't sleep on the stock, only 20 times forward earnings for a company like Disney, which granted has struggled really since the pandemic to get his act together.

But as far as maybe a value investment, dare I say, Disney looks interesting to me. I was going to say Disney largely unmoved this week by this news. I think it was actually down about 2%. And I don't know if that's because the market is not all that interested in Disney's streaming ambitions or because they also announced that they were buying Fubo TV this week, then announced that they were not going to be launching venue sports with some of the partners for that joint venture.

Do we feel like we need a little bit of strategic direction on the streaming side from Disney around? Communication is key. Let's get some good strategic communication. I think they've got some strategies there, but we just need a clear guidance on them. All right. Sticking with the ad theme, this week, Amazon announced its retail ad service product, which will allow retailers in the U.S. to show ads on their sites.

Users will be able to customize the design, also the placement and ads that are shown and use some of the ad measuring tools and analytics that Amazon makes available. Jason, summarizing that, it sounds an awful lot like what Google offers to web publishers for ad tools. Yeah, well, this is the Googlification of Amazon, right? I mean, they are becoming a little bit more of what companies like Google historically have have been, and that's because they recognize the opportunity there in the advertising space. I mean, it's not just streaming, right? I mean, it's just advertising in general.

And I think that this is something that can provide Amazon with a bit of a one-two punch, so to speak, in the ad space, because not only do they make money from selling the ad space, but it's going to provide, as you mentioned, it's going to provide Amazon with valuable data, that it's going to be able to use to bolster ad predictions and recommendation technology, which makes its retail business, which is the core of the business, ultimately even stronger. Just a lot of different ways that Amazon can win from this. It wasn't that long ago. We were just kind of looking at advertising as sort of an afterthought with Amazon.

I mean, ad revenue in the latest quarter, it came in just over $14 billion. It's third to Alphabet and Meta. So it's become a major player in this space in a short amount of time, it feels like. And yet that's their third best revenue stream, right? You got $61 billion for the online stores, $27 billion for the cloud computing, only, in quotes, $14 billion for the ad revenue business. This could be a nice bump there, something that I think people were wondering when this would happen, and here we are. So that third division now could start to creep up on maybe even the cloud business in a year or two. Well, yeah, and I think that's a lot of investors probably have looked at Amazon over the last couple of years or so and said, I mean, this is a business.

that's extracted so much value from its retail operations and as Amazon Web Services. And is this a stock that's really worth owning today, given how large the company is? I mean, it's a fair question. But I think when you look under the hood a little bit and you see the opportunities that still exist there, not only on retail, not only on Amazon Web Services, but obviously now in advertising and how all three of those businesses can complement one another so powerfully, I mean, as an Amazon shareholder myself, I have zero intentions on unloading that stock anytime. soon.

I'm with you on all the strategic vision here. And I think for me, it's nice because to me, it shows that they are getting levers outside of just bringing more ads onto the core Amazon e-commerce experience, which I think as a user, as a buyer, as a shopper, I have noticed the search results have gotten deprecated a little bit recently, Ron. Yeah, yeah. It's not a great experience some days searching for whatever you're searching for. but it's still worth my prime membership year after year after year.

That quick shipping, it's going to get you. All right, rounding us out on advertising news. In an address this week, CEO Mark Zuckerberg announced that Facebook and Instagram will stop its use of fact checkers and will replace them with crowdsourced community notes, similar to how moderation is currently handled on X. Zuckerberg essentially saying the guidelines were meant to create platforms that were more inclusive and they have gotten complicated and overly restrictive, preventing free speech, filtering out activity that maybe shouldn't be suppressed. Jason, is this a user-friendly move?

Is this an advertiser-friendly move? Is it both? Is it neither? I think it's something that ultimately can serve all parties well, right? I mean, I think, I'd like to believe he's making this decision because of what he said. And the fact that there's some proof of concept out there that the community notes way of things can actually work quite well. I mean, if you look at X as just an example, formally Twitter, I mean, I know that that's a platform that elicit strong opinions and that's understandable, but they've clearly proven that the community notes is a promising way of managing information that flows through the platform. I mean, it is more transparent. It points to actual source material with the facts. It's a heck of a lot

cheaper. And then that it's sourced from the community itself. The odds are that they want this to be a thriving community of accurate information to begin with. So I mean, there are a lot of opportunities to capitalize on there. It's not to say it's a perfect way, but it certainly has been a very effective way in my experience as a user. So I'll be interested to see what his feedback is over time on this. I have been a long-term owner of Meta Facebook, and I don't think I'm selling any time soon. 25 times earning seems fair to me for this business.

There's a lot of things going on here, though, that I need to digest and I need to kind of see how it shakes out. I think the business is fine, but there's a lot of potential backlash that could come from this, which is a risk that I think investors have to keep in mind. Yeah, we know the X side when it comes to users. We don't know what it means in terms of financials. We don't get access to what's going on quarterly over at X. We'll see what happens. All right, Jason, Ron, we'll see you guys a little bit later in the show. Up next, we're going to get the download on the state of real estate for 2025 with Bigger Pockets, Dave Meyer. Stay right here. You're listening to Motley Full Money.

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Quince.com slash Motley. Welcome back to Motley Fool Money. I'm Dylan Lewis. We love talking stocks here at the Motley Fool, but we know there are plenty of places that you can put cash to work, including real estate. When we want to talk about buildings and homes, we turn over to our friends at Bigger Pockets. This week, my colleague Matt Argusinger, caught up with Dave Meyer. He's the head of real estate investing over there. Matt and Dave talked through Dave's annual look at the state of the real estate market report

and why the hottest markets might not be the areas with huge population increases in 2025. Dave, in the report, you describe the state of real estate investing as transitionary. I'd love to know what you mean by that. And maybe the better way to put it is what is the real estate market transitioning from and maybe what is it transitioning to? I believe that real estate works in cycles similar to. to other markets. They may not be as obvious as stock market cycles or broader economic cycles, but you do still see the traditional phases of a business cycle in real estate where there's

an expansion, there's a peak, there's a quote-unquote recession or a reversal. There's a trout. And then it starts growing again. And I actually believe we are coming to in 2025. I don't know if it's today as of a recording or five or six months from now, but I think we're coming to the end of the last quote unquote real estate recession. We can talk about what's characterized that, but I do think we're entering a new expansion era for single family real estate, particularly in terms of sales volume and inventory. And that is a real key thing here because what I'm saying that the real estate market's been in somewhat of recession, it's because no one's buying houses right now. We've seen the number of transactions dropped 50 percent since 20.

22. And although prices are probably, in my opinion, going to remain somewhat flat for the next year, I do think we're going to start to see some health restored in the real estate market in terms of more transactions happening, more homes being listed for sale, more people moving a little bit and unlocking some of the just the gridlock, frankly, that we've been in in this industry for two or three years now. Yeah, you mentioned the home transactions. And one of the charts you have in the report shows existing home sales. And it's amazing to see that right now we are at the lowest annualized volume of sales since the global financial crisis, since kind of right after the last major recession we had. What is the chief culprit of the sluggishness in your view?

For me, almost everything, you'll probably get bored of me saying this in our conversation, but for me, almost everything in the housing market right now comes down to affordability or the lack thereof. Affordability in the housing market is just a measure of how easily the average American can afford the average priced home. And that's made up of home prices, people's wages, and mortgage rates. And just in the last three years, we've seen affordability evaporate as prices continue to go up and mortgage rates have skyrocketed as pretty much everyone knows. Now, this lack of affordability has dual impacts on the market. The obvious one is a reduction. of demand. I think that one makes sense to most people that, hey, things are getting more expensive.

I don't want to, or not that you even don't want to buy a home, but you can't afford to buy a home anymore. The other thing that's happened, though, is that low affordability, it's kind of unique to the housing market, reduces supply as well. And that's because in the housing market, nearly 80% of people who sell a home go on to buy one. And so when you have these rough buying conditions like we have today, it stops people from selling as well. And we can go back to Econ 101 and draw a little supply and demand charts. But when you see supply go down and demand go down at the same time, volume or quantity in the marketplace declines. And it's just kind of a textbook example of that going on. So you mentioned the mortgage rate skyrocketing, which is just interesting because we

know we've been on a Fed easing cycle since the fall. Yes. We still think, and we still think we're on one, we're not exactly sure as we get. Yeah, we'll see. But can we have a recovery in existing home sales? Can this market get unstuck if mortgage rates remain where they are, which is close to 7% right now? I think it's going to be very slow. And that is sort of my hypothesis for the cycle changing right now is that even if rates come down, I do think it's still going to be slow either way. In real estate, we see behavior, especially for sellers driven by two things. One is opportunity. You know, if there's good opportunities to buy people trade up or even trade down or, you know, move to different places, look for new opportunities. That's one thing. And the second

thing is just necessity. People change jobs or you not need to move for your kids' school, or there's death, or there's divorce. And those things don't really. go away. That basically sort of sets the floor for volume in the housing market. And the hypothesis, and we're starting to see this bear out in the data, is that even with higher interest rates, people have sort of been able to defer some of those life changes for a little while. But eventually people get used to mortgage rates. They need to move. They want to be closer to family. They want to be in a different school district. And they just start getting used to it. And we're starting to see that. you know, inventory has likely bottomed. It's starting to increase right now. And we're starting

to see transaction volume just to tick up a little bit. And that's even despite, as you said, mortgage rates have gone up since the Fed started cutting rates. And so if the Fed cuts even rates even more, if rates come down, mortgage rates start to come down for some of the external reasons outside of the Fed, I think that will just add a little bit of fuel to the recovery. So if you're if you are a real estate investor, so yeah, people, you know, people obviously life changes moves have to happen. But if you're looking at it from an investing lens, should I wait for rates to come down? I mean, you know, I know that the Fed, we don't know what the Fed's going to do, but it seems like they've telegraphed hopefully at least two more cuts this year. Yeah, not certain, of course. But should I wait then for that to take place and for more, you know, for that to translate into lower mortgage rates? Or what's the advice there? That is the million dollar question. And my advice is not to wait.

I'm not waiting. It's January 9th today. I've already made my first offer on a property this year. I'm waiting to hear back today. So we'll hear. But here's two reasons why. First is I am much less optimistic than I think most people are about mortgage rates coming down this year.

And I agree the Fed probably will cut rates one or two more times. but as we've seen, the federal funds rate and mortgage rates are correlated, but not perfectly correlated. Mortgage rates are much more closely tied to the yield on 10-year treasuries. They are, you know, that's almost a perfect correlation. If you look at the two charts, they just move basically in lockstep. And what we've seen since the election, sort of the run up to the election, when the market started to feel like Trump was going to win and since Trump's victory, there is now, a bigger fear, it seems, in the bond market, you probably know this, of inflation than there was of recession. And so that switch in market sentiment from fear of recession to fear of inflation

sort of drives yields up and has kept mortgage rates up. And I think they're going to stay up until we get a better line of sight on which economic policies Trump has campaigned on that he actually will implement and what the shape of those policies actually start to look like. because if you start implementing 20% tariffs, which he's said across the board, that's probably going to be inflationary and keep yields up really high. If he cuts taxes, that could provide a huge boost to the economy, but it also could be inflationary. And so I believe that we'll get some clarity about that, but not really. And we might not be in the first, and it's not going to be the first week of his, you know, his term. And so I think it's going to take a little while for the market

to feel comfortable about the direction of economic policy. And until then, they're probably going to, you know, yields are probably going to stay a bit higher and so will mortgage rate. So I don't advise waiting because you might be waiting for a long time. The second reason is that home prices are expected to grow this year. I sort of said that they would be flat. That's in real terms. I think a nominal non-inflation adjusted terms, they probably will go up a little bit. And so by buying sooner, you first start to pay down your mortgage, which allows you to pay old principal and equity. And second, you get sort of the upside potential of any appreciation. And real estate has historically been a very good hedge against inflation. And so if you're fearful of inflation, then real estate could be a good

avenue for you to park money to at least keep pace with inflation in terms of home prices. And then you enjoy a lot of other benefits as a real estate investor beyond just home values. Right. Let's stay on the price and value a little bit. One of the things that was also interesting from the report is where you're actually seeing year over here price increases. And recently, I think it's flown in the face of what a lot of people expected, which is it's really happening on the coastal and sort of your legacy markets. You're in California, you're northeast, your Midwest. And we know in the years before the pandemic and the immediate years after the pandemic, a lot of that, uh, demand. was going to more Sunbelt states, Texas, Arizona, Gulf states. That's kind of shifted, even though that's where we know that demographic tailwinds are. Why do you think this shift is happening? And is it simply there was too much demand and so therefore too much construction, too much building in places like Austin, Texas, and now we have a kind of a supply overhang?

Yeah, that is the, I think the majority of it is that a lot of the markets in the Sunbelt, some of them in the Mountain West have become victims of their own success in a way. When you see, you know, back in 2020, 2021, we saw this huge migration shift and demographic shift to the south, to the south in general, the Sunbelt. And that drives up home prices and developers love that. And so they all started building both single family homes and particularly multifamily apartment buildings. And with multifamily, it takes a few years for those things to be built. And so they're getting permitted and funded through 2022. And they're still coming online right now.

We actually, you can see it. It's pretty striking if you look at the data. The number of deliveries, which is just an industry term for how many units are finished and put on the market for lease or for sale, it's at a 50-year high right now. And then it's going to last through the first half of 2025. And then it's basically going to stop, the pendulum has swung back in the other direction. And so I do think this year will be a rough year in terms of pricing for Texas and Florida.

And by rough, I don't mean like, we're not talking financial crisis declines or, you know, two or three percent. You know, it's not going to be a great year for them. Whereas these markets that have sort of been more, it's sort of a tortoise and a hair thing, you know, slow and steady Midwest markets, New York markets, they didn't see this huge boom. in construction. But there's still demand in those places, and that's why prices have gone up there. I expect Midwest and New York, Northeast, those prices to moderate a little bit this year. They've been up pretty high. But I still think they'll continue to grow, particularly in nominal

terms. All right. Well, I think we'll, let's leave it at this. Besides, of course, reading the report, besides joining Bigger Pockets, which our listeners should absolutely do, what is the best advice that you can give an investor who is, you know, looking to get more active in physical real estate in 2025. You've mentioned a few things, but is there anything you can leave, maybe our listeners, someone who's saying, you know, hey, I think this might be the year I want to buy my first rental property or my first, maybe my first multifamily property duplex or something like that. What's kind of your advice? Real estate is a long game. It's, I know at Motley, you guys often talk a lot about long-term

investing, and real estate is sort of like the same thing. I personally buy deals for 10 years from now, for 15 years from now. I try and find good assets in good neighborhoods that are probably going to keep growing. We're in a weird economic time. Everyone knows this. No one knows for certain what's going to happen in the next year or two. So I really recommend people sort of look beyond that because just like in the stock market, if prices go down a little bit, if they're a little flat in the next year or two, it's just a paper loss. And in real estate, you're still getting the benefits of amortization. You get cash flow. You get amazing tax benefits. And I think a lot of people just get hung up on property values. It's super

important. Don't get me wrong. But you can still earn a six, seven, eight percent return, even if property values are flat in real estate. And as, you know, just go Google the median home price in the U.S. If you look at it over the time, home prices do go up in the United States. They are going to keep going up. And so as long as you sort of have this long. long-term mindset, I think finding deals is not as hard as it's made out to be right now. All right. Well, Dave Meyer, Bigger Pockets. Thanks so much for coming on Molly Full Money. Thanks for the conversation. Thanks for having me. Listeners, you can catch Dave on Bigger Pockets on the Market podcast and get a ton of great

resources on real estate investing over at BiggerPockets.com. Coming up after a quick break, Jason Moser and Ron Gross returned with a couple stocks on their radar this week. Stay right here. You're listening to Molly Full Money. 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 MotleFool editorial standards and is not approved by advertisers. The Motley Fool only picks products.

It would personally recommend to friends like you. I'm Dylan Lewis, joined again by Jason Moser and Ron Gross, and we're diving right in to radar stocks this week. Guys, each week you bring a stock. Each week, our man behind the glass, Rick Engdahl, hits you with a question. Jason, you're up first this week. What are you looking at? Yeah, Dylan, so this week I'm looking at Paylosity, tickers PCTY.

You know, next Wednesday we have an exciting AI event that will be available for all U.S. premium members. And part of my presentation is on Paylossy. So I've been digging a little bit more into this company for that event. Paylossity is a provider of cloud-based human capital management and payroll software solutions here in the U.S. So they offer products and services like payroll and tax services, human capital management, including things for, like employee self-service and talent management solutions for recruiting and onboarding. They benefit from actually participating at the lower end of the market, smaller businesses that may not have access to those types of products or at least alternatives can be tough

to find or more expensive. And, you know, this is a business that's also leaning into our AI-driven future with things like AI-driven schedule optimization, which helps meet the needs of employees, AI-led learning recommendations to aid employee development and career paths, as well. as AI-powered recommendations built on generative AI to increase overall employee engagement. So it's an interesting business, cash flow positive, even after stock-based compensation. It's profitable. Net margin continues to grow hitting better than 15% over the last 12 months.

I tell you, it's a compelling business. I'm enjoying digging into it. Rick, a question about paylosity, ticker PC, Ty. Well, you know, I like to go to the website and learn a little bit about the company. Sure. I'm looking at the paylosity difference. here, which is our all-in-one solution combined with award-winning service makes us the best partner to help your business.

Now, that doesn't sound a lot like a difference to me, so I'm wondering, does this company have a moat? Well, I think it's a very competitive industry, and say the least, so I don't know about a moat, but I do like the fact, like I mentioned, they participate on that low run of the market where businesses are looking for more cost-effective solutions. And it's worth noting to the founder and director, Steve Sedarowitz, still owns about 16% of the company. So clearly, he sees good days ahead as well. Well. Ron Jason is gazing to the future, riding the AI wave with his radar stock this week. Where are you going?

Backwards. I'm taking a first look at Gannett, thanks to my friends over at our Value Hunter Service, ticker symbol GCI. And it's sort of new to me that I don't know if it's called Gannett or Gannett. I've heard Gannett. I've heard Gennett. I think Gennett. A media company. Most people would know it as the owner of USA Today, but they also own hundreds. of regional properties like the Arizona Republic, Cincinnati Inquirer, Detroit Free Press, and many, many more, generate revenue primarily through the sale of subscriptions and advertising. Now, the rub here is that it's widely believed that the legacy newspaper business is dying, and I think that's probably correct. Their revenue, for example, fell from $2.2 billion in 2020 to $1.3 billion in 2023 as readers and advertisers shifted online. But the good news is they are shifting as well. They're turning themselves more into a content business, think things like games and puzzles, high school and college sports coverage,

full-time reporters hired to cover fan favorites like Beyonce and Taylor Swift, much more content generated, much less not like the legacy newspaper business. And that's actually a higher margin business. And so it looks like it could be an interesting company, a real value investment here from our friends over at value hunters. Ron, we know you're a Swifty, so we knew Gennett was going to work its way in there. Rick, a question about Gennett, ticker GCI. My friend David Gardner taught me to invest in the world that I want to see in the future, right? Is it a better world when all of these local newspapers are owned by a company like Gannett?

Is that part of the problem? Is that part of why the press is dying, is that they've all been consolidated like this? I think, well, the Internet is probably the primary problem. A primary problem, but not the only problem. I love the idea of small town newspapers, as Warren Buffett has said in the past as well. But it's just a tough business in this environment. Rick, which one's going on your watchlets this week? I want to be paid, so I'm going to go with pay loss.

Love it. Jason, Ron, thanks for bringing to radar stocks. Listeners, if you want to become a member of Stock Advisor ahead of the AI Summit and get that Wednesday day of content, you can at fool.com slash sign up. If you're listening to the podcast version of today's show, we'll drop that in the show notes as well. That's going to do it for this week's Motleyful Money Radio Show. Show is mixed by Rick Engdahl. I'm Dylan Lewis. Thank you for listening. We'll see you next time.