Motley Fool Money - Big Tech Layoffs, Signs of Housing Trouble

Episode Date: January 20, 2023

Alphabet and Microsoft are laying off a combined 22,000 employees. Is Apple next? (0:21) Matt Argersinger and Jason Moser discuss: - The ripple effect of Big Tech Layoffs - Netflix founder Reed Hastings stepping down from his co-CEO role - Cancellation rates soaring in one segment of the housing market - Differing views on interest rates from two major bank CEOs - The latest from Procter & Gamble, Nordstrom, and holiday retail data (19:11) John Rotonti talks with Jurrien Timmer, Director of Global Macro at Fidelity Investments, about what history can teach about the current market cycle and sectors that may hold opportunities for investors.  (33:30) Jason and Matt answer listener questions about CEOs they'd like to shadow for a day and under-the-radar trends, and share two stocks on their radar: Roper Technologies and Regions Financial.  Motley Fool Stock Advisor is open to new members for just $99 a year. Join the hundreds of thousands of investors in Stock Advisor by going to www.fool.com/intro. Stocks discussed: MSFT, GOOG, AAPL, NFLX, KBH, JWN, PG, JPM, MS, BX, ETSY, SBUX, ROP, RF Host: Chris Hill Guests: Jason Moser, Matt Argersinger, John Rotonti, Jurrien Timmer Engineer: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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We've got CEOs to follow, under the radar trends to watch, and we've got the latest from Big Tech. Motley Fool Money starts now. 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, Motley Fool Senior Analyst, Jason Moser, and Matt Argusinger. Good to see you both. Hey, Chris.

Hey, hey. We've got the latest news from Wall Street. We're going to dip into the Fool mailbag, and as always, we've got a couple of stocks on our radar. But we begin with big tech. This week, Microsoft and Alphabet became the latest major companies to announce layoffs. For Microsoft, it was 10,000 employees, roughly 5% of the workforce. Alphabet, 12,000 employees, nearly 7% of the workforce. And Matt, a common refrain from these companies in the sense that both talked about how they overhired during the pandemic.

Right. That's not a secret anymore. And it just seems like every day we're getting a new major announcement, you know, that a tech company, a major tech company is cutting tens of thousands or thousands of jobs, 67% of their workforce. It almost feels like we're getting numb to this happening. And I think it's also easy to ignore and set aside a little bit because the economy overall is still adding jobs. The unemployment rate is still, I think, around 3.5%, which is near a record low.

I think we have to remind ourselves that these companies are the largest companies. companies on the planet, and they have massive tentacles within the overall economy. So a 12,000 job cut from Alphabet, it doesn't just affect Google employees. It affects workers who clean Alphabet's offices, food service workers, businesses that do consulting or HR work for the company, businesses that partner with Alphabet on various projects. So the more of these come, I feel like the more we're going to see downstream effects to the overall economy. And I think we're getting to a point where there's no, it's no longer going to be about

inflation that we're concerned about or what the Fed is going to do next. It really is going to start being about jobs and consumer spending. And so I don't want us, you know, listening to this and seeing these headlines and saying, yeah, well, things got overheated during the pandemic. These companies are just sort of, you know, correcting and there's going to be a reversion to the mean. Sure. But the economy is in a vulnerable state. And I think the more this happens, the more we're going to see that. Jason, it does seem like a citizen situation where now the eyes turn to Apple. I mean, Apple's really the loan major tech company that hasn't made this kind of announcement. Do you expect them to? And if they do, what

does it say? Because you can look at Alphabet for all of their success. Their employee base is actually a little bit smaller than these two other companies. Yeah, it is. And I guess it's kind of a coin flip as to whether Apple does this or not. I feel like they may be a little bit more insulated than some of these other companies, really just due to the nature of the actual business. I mean, at the end of the day, right, Apple is still primarily the iPhone company. I mean, it's a hardware company that uses that hardware. It's kind of a gateway drug to then bring people into its universe and sell those services

and develop long-lasting relationships. It certainly is possible. We've seen slow down on the services side for that business, and so it is possible that they may feel like There are some areas where they can trim a little bit of the fat, so to speak. I don't, in regard to Apple, I just don't expect it to be as drastic, perhaps, as some of the other big tech names we've seen. Let's move on to Netflix and founder Reid Hastings, going out with a bang in addition to announcing that subscribers in the fourth quarter came in much higher than expected.

The streaming giant announced that Hastings will be stepping down as Co-CEO, but staying on as executive Chairman of the Board. Chief Operating Officer Greg Peters has been promoted to co-CEO alongside Ted Sarandos and chairs of Netflix up 7% on Friday, Jason. Yeah, I mean, on the face of it, it was a very strong quarter just due to the subscriber growth alone, right? I mean, they guided for around 4.5 million subscriber additions for the quarter chalked up around 7.7 million. So a great, great report from that perspective. Revenue, $7.8 billion that was up 10% from here ago, excluding current. effect. Operating profit down slightly, but better than the target they set. An average revenue

per member was up 5% on a currency neutral basis as well. Really good news on the cash flow front for the year generated $1.6 billion in free cash flow versus a modest loss a year ago. And they are now guiding for $3 billion in free cash flow for this year. And ultimately, project being free cash flow positive from here on out. So it does feel like maybe this is Maybe that's why I read Hastings feels like this is a great place to sort of pass the torch along, right? He's got this business where he wants it, where it feels like it can really start to grow and produce meaningful, meaningful revenue and cash flows now. I'm still not bought in on the co-CEO CEO model. It feels like every time we talk about this, a year later we revisit why it didn't

work. It just, it's not to say it's not to say it can't work in this case, but I don't know. I just Just like the chain of command a little bit more, CEO, C-O, you got the decision makers. They know their roles. It is a business in transition, right? I mean, you've got the ad-supported model rolling off now. It's off to a slow, but what they consider a satisfactory start, and they will continue to start cracking down on the password sharing here, which could crimp results in the near term, but I think ultimately it's the right long-term call.

Do you think part of the timing here is they've been? just launched the ad tier and if you dose him with Truth Serum, Reed Hastings didn't want to do the ad tier, did he? I don't believe he did. I mean, I think he made the right call ultimately in doing it because that opportunity is so large. I mean, they quote this market opportunity in the call with this estimated $300 billion paid TV and streaming industry along with the $180 billion branded TV advertising spend.

It's not to say Netflix is going to capture all of that by any stretch of the imagination, but it is to say that it's a big market opportunity that business can pursue, and they feel like he can ultimately contribute 10% or better to the business. Now, I mean, that's $3 billion plus by today's numbers, and this is a company that will continue growing. But back to your point, no, I don't think Hastings really wanted to do it. I feel like he probably felt like they had to do it. way, it sounds like it's going to be someone else's problem going forward.

Signs of trouble in the housing market. In the last three months of 2022, KB. Homes, which is one of the largest home builders in America, experienced a cancellation rate of 68 percent, meaning homebuyers canceled 68 percent of the homes that went under contract. And for context, just one year prior, the cancellation rate was only 13 percent. Matt, there are a couple things I want to get to here, but first and foremost, how bad does this look for the housing industry? Yeah, that's a dire statistic from KB. Holmes, and I don't think they're going to be the only one.

They just happen to the one that reports earliest. Yeah, and you said it, you know, normally their cancellation rate is a lot lower for the industry. It's usually in the teens, you know, but the reality is a lot of these buyers are having trouble getting financing or they're locked into a good rate, but are worried they overpaid by, you 10 to 15% for their home. And I think that's a real worry. And that's probably the case for most markets across the country. And I just would say that housing is a major contributor to the economy. You look at construction, materials, home improvement, financial services from the mortgage

lenders, etc. It feeds into so many places. And so to see a cancellation that high, it's remarkable to me that KB homes didn't sell off more, that the home building industry hasn't really sold off that much, but a lot of it was, they had a difficult 2022 already. Some of this was priced in. So, earlier you were talking about the ripple effects of the layoffs at the major tech company, and you're absolutely right about that. It's not just for those individual people. There are ripple effects when the companies are that large. Let's apply that thinking to this story, because, you know, this cancellation rate, we saw that, you know, the last time we saw it

this high, it was 2008, 2009, and that was a housing crisis that threatened the entire U.S. economy. Based on what you have seen so far, does this at least look contained to the housing industry, even allowing for the ripple effects for, you know, businesses tied to the housing industry? Right. It's a, that's a good question. I don't think this spills a, over into a larger issue for the economy, the way it did back in the last housing bubble in the financial crisis. I think the scars from that global financial crisis runs so deep. And as we discussed before the show, you didn't have the same speculation in this latest

housing run-up that you had back then. You don't have the banks lending out billions of dollars to unqualified buyers. Homeowners who bought, even in the last few years, they still have a ton of equity in their homes. So even if prices drop 10, 15% nationwide, a lot of those buyers or homeowners are still protected. But yeah, at the margins, I think this hurts consumer spending. Absolutely. Especially when you marry it with some of the issues we talked about that you just mentioned, like those massive job cuts at Microsoft and Alphabet and the others, Amazon, Salesforce, Twitter, etc. Or we could get into the other issues, you know, the surge in car loans, the surge in credit

card debt, which is at record levels, I believe. So I think it certainly could factor into lower consumer spending. And to a certain extent, I think we're going to start seeing it with fourth quarter earnings. After the break, we're going to get a check on how the holiday retail season went. And we're going to head to Switzerland for a headline out of Davos. Don't touch that dial. You're listening to Motley Fool Money. Welcome back to Motley Full Money. Chris Hill here with Jason Moser and Matt Argusinger. Quick shout out to our flagship investing service, Stock Advisor. When you join Stock Advisor, you get two new stock picks every month, plus you get access to exclusive reports on fast-growing industries and exclusive access

to our brand new Stock Advisor Roundtable podcast on Spotify. The service is open to new members. It's just $99 a year. And if you want to learn more, just go to fool.com slash intro. That's fool.com slash intro. Late this week, Nordstrom said that week's sales and lots of discounting hurt their holiday sales. Not surprisingly, Nordstrom cut their earnings guidance for the fiscal year, which ends later this month, Jason. Yeah, well, I mean, the preannounce is usually not good news. And in this case, that street continues. I think the company summed it up nicely in the release, where they said, I quote, the holiday season was highly promotional and sales were softer than pre-pandemic levels, end quote.

And to quantify that net sales down three and a half percent for the nine-week holiday period that ended the year versus the same nine weeks from a year ago, it seems like the wealthier, better off shopper is still spending. The lower income spenders are not. And that's certainly playing out on Nordstrom. They took additional markdowns on inventory and they feel like they've got inventory in a good place now. But you know, you look at this business, you go back to, You go back to 2018 at this time during the year. The share price was closing in on $60. And when you look at the numbers, revenue for the full year clocked in around $15 billion.

They saw net income, $437 million. You look at this today, right? Share price now around $17, I think. You're looking at revenue, same. $15 billion hasn't really moved. Big difference in the bottom line. line is shrinking. They're trailing 12 months, $326 million now. But it gets better, Chris. If you look at the balance sheet for this company, and this is what's really concerning,

I think investors really need to take note of this. You go back to 2018, their balance sheet, they had $1.2 billion in cash and equivalence. You look at that number today. It's 293 million, right? That's what we call that cash burn. It's worth watching because it plays out. It's an indicator. It tells you what the business is doing and sort of the state that the business is in it. Right now, this is a business that's really hunkering down, I think, for some tougher times ahead. And not that Nordstrom is necessarily a bellwether for the retail industry, but we also got some additional data. Last fall, the National Retail Federation predicted that holiday retail sales would grow 6 to 8 percent. And their track record is really strong. And earlier

this week, we got data. Overall sales grew 5.3 percent. I'm a little worried. that the National Retail Federation missed by the margin that they did? Well, they did miss, but let's give them a little bit of credit, right? Let's give them partial credit because they did nail the year, right? They said sales for the year would fall between 6 and 8 percent, and sales for the year grew 7 percent. So they did at least bring some of the noise, so to speak, right, Chris? But, yeah, I mean, I think when you look at all of the retail categories,

I mean, over a year ago, So there were gains in all but two of the nine categories. Furniture and home furnishings were down 1.1%. Interestingly, electronics and appliances were down 5.7%. But there was an interesting quote in that release that I just thought, I don't know, I'm kind of pushing back on this one. They said the last two years of retail sales have been unprecedented. No one ever thought it was sustainable.

I don't know about you. It seems like a lot of businesses hired because they thought it was sustainable. And now they're realizing it's unsustainable. and they're letting all these people go. So I think a lot of businesses did think it was sustainable. It's just now we're realizing it. It wasn't, and they're having to right size accordingly. Procter & Gamble's second quarter results were in line with Wall Street's expectations.

But every division of the consumer products giant reported lower sales volume in the quarter. And Matt, it's not like P&G's stock got hammered this week, but it does seem like the business has hit the ceiling in terms of raising prices. Yeah, I think that's the case. I mean, with any business, even a consumer-stable business like P&G, at some point price increases are going to hurt demand. It wasn't a terrible quarter necessarily. I mean, if you looked at headline sales were down 1%, but if you take out foreign exchange

and adjusts for some acquisitions and investors, the sales were up 5% on an organic basis. But the point is all of that came from price increases. As you mentioned, sales volume was down in all five of the company's main segments. Overall volumes were down 6%. And it's just fortunate that prices were up 10%, so you get the overall sales increase. But I think what I'm worried about is now going forward, you know, well, though, can they have more sales price increases? Probably not. And you can look at their earnings per share.

It was down 4% year over year as, you know, even higher sales weren't able to offset higher operating expenses. And that, I think those headwinds only get stronger as we go through 2023. But should you worry if you're a P&G shareholder? For one, I expect the company is going to raise its dividend again next quarter, and that'll mark the 67th consecutive annual dividend increase. Wow. They've been paying a dividend for 132 years. So, you know, and believe it or not, the stock has outperform the market of the last five years.

So, you know, if you're a P&G shareholder, I wouldn't worry. It's not necessarily why you own the stock, but you do at some point have to say, have to expect revenue to slow down here. Price increases are just not going to be able to flow through as they were earlier in 2022. The World Economic Forum in Davos, Switzerland always attracts some of the biggest CEOs in the world, but two from the same industry shared different predictions of what the Federal Reserve will do this year. J.P. Morgan Chase CEO, Jamie Diamond, said he believes interest rates are going higher than 5 percent, while Morgan Stanley CEO, James Gorman, said that interest rates have clearly peaked.

Jason, who do you think is going to be proven correct? Well, we could get to that just one second, but I just want to say, can you imagine how triggered crypto investors had to be when Diamond said what he said about crypto in that interview? In calling it a pet rock, in saying why you guys waste any breath on it is totally beyond me. I mean, he couldn't have had harsher words. And then he went further to sort of split crypto and blockchain technology. I just thought that was an interesting conversation for sure in regard to interest rates. I think I'll tend to side with Diamond on this one simply because

I think the Fed, I think Jay Powell, they think they've been pretty consistent with what they've been saying they want to do and that they would rather overdo it than not do enough, right? They've already botched the whole transitory call. And I can't imagine that he or they want to risk something else coming back to bite them, something as significant as this that's really guided every policy decision. And so it just kind of feels like at least if he overdoes it, then that will be consistent with what he's been saying all along, you know, kind of that better safe and sorry mentality. But I guess we'll have to watch how the year plays out. All right, Jason, Moses, Matt, Arco, singer. Guys, we'll see you a little bit later in the show.

But up next, if the era of easy money is over, should you change the way you invest? The answer's coming up after the break. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Uri and Timmer is the director of global macro at Fidelity Investments. Motley Fool senior analyst John Rotante caught up with Timmer to learn what history can teach us about this market cycle and sectors where there may be some opportunity for investors. Someone else that the markets follow very closely, Howard Marks,

thinks he has identified only the third, what he calls C change in his 53-year investing career. In his recent memo, he says that the investment strategies that work best over the prior 13 years, quote, may not be the ones that outperform in the years ahead, end quote. Similarly, KKR, the large global alternative asset. asset manager just put out their investment outlook for 2023, where they say, quote, we have entered a regime change that requires a different approach to overall global macro and asset allocation, end quote. So what do you think about this? Are we in a C change or a regime change? And if so, does that require a change of strategy from the profitless, high multiple tech stocks that benefited, you know, over. the last several years from a zero interest rate policy? No, it's a great question, and it's a very important one, especially for the structural outlook. And I think, you know, if I can summarize the KKR and Howard Marks, I think maybe what

they're saying is that the great moderation is over, right? So you look past going to history, and I look at a lot of history, which you can tell from my charts. Yes. You know, until the late 90s when we went into kind of this disinflationary era called the Great moderation where you had lower inflation, lower interest rates, less volatility of inflation and interest rates, therefore higher multiples. You had financial engineering start to take shape.

You had the feds kind of, you know, the Fed's put, you know, the Fed put, if you will, lower rates, but quantitative easing. as soon as financial conditions would tighten, the Fed would put its foot on the gas battle because there was no inflation price to be paid for that at that time. And so that was this great secular bull market where PEs were high, volatility were low and returns were outsized and interest rates were well behaved. And the Fed would always bail out the market. You know, we can't know in real time whether the great market.

moderation is over, but certainly it looks over, at least at this point, right? You look at inflation, which is now coming down, but it's come down from nine to six and a half or so. And the question is, will it go down all the way to two or will it start getting really stubborn at three or four? And, you know, we don't know the answer to that yet, of course. But the period before the great moderation was pretty volatile, right? I mean, you had the classic inventory cycle where the economy starts to overheat, it becomes inflationary, the Fed starts to tighten, the yield curve inverts, the Fed overstays its welcome, it breaks something, you get a recession, and then the whole cycle starts over. That was the four-year cycle, right? I mean, you look at all charts of the Dow Jones, and you can see that four-year cycle very, very clearly.

the market today kind of feels like the old market, right, before the great moderation. It's more volatile. Maybe the cycles are shorter because you don't have these elongated periods where inflation just doesn't do anything. And part of that has to do with globalization. The great labor arbitrage may be coming to an end, either for geopolitical reasons or just because it's been played out, right, that the labor arbitrage has just has been played out. So it's possible that we go back to the markets of yesteryear in that sense.

And you mentioned, you know, like the big growers, right? The fangs, the large growth names. And I tend to, I've been following that whole phenomenon, not specifically for the fangs, but what we call the nifty 50 stocks. And we have a custom series here that we create in-house that goes back all the way to the 1960s, where you can clearly see the nifty 50 period kind of coming up. So the top 50 stocks in the S&P relative to the bottom 450. And the original Nifty 50, of course, wasn't in the early 70s, right, which happened when, and this goes way back, but in 68, you had a big speculative bubble. People were speculating in the space stock, right? Any company with the workronics in it was just bit up to 50 times earnings. So that was kind of, those were the glamblative.

as they were called. And then, you know, the market fell. We had a recession in 1970. It wiped out retail, like the retail speculators. I mean, very similar to the meme stock stuff of today and the dot-com stuff of 1999. And then when the market recovered, the market was in the hands of institutional investors. And they would only buy the companies that they knew they would never have to worry about in terms of producing earnings.

So they were like the one-end done companies. like Colgate and IBM and Xerox and companies like that. And those were the original Nifty 50. That became a bubble relative to the rest of the market. And then a long, long period where they underperformed because we had inflation in the 70s that tends to favor value stocks and small cap stocks, not the big growth stocks, which are, of course, sensitive to changes in interest rates, which were soaring back then. then we had a similar episode in the late 90s,

forced the dot-com bubble. We all know how that ended. And then around 10 years ago, the current phenomenon started, and it never reached bubble levels, like the P of Apple never went to like 100. But relative to the rest of the market, the performance looked very similar.

So we had an eight-year run of large-cap growth companies dominating everything else, small cap value, and by extension, the U.S. would dominate non-U.S. because the U.S. is very centric to those very, very large growth companies. And purely from a technical point of view, it looks like that trade is over. And if that trade is over, you juxtapose that against, again, a really long-term chart going back 100 plus years of large secular swings between value and growth. small and large U.S. and non-U.S. commodities and financial assets, and they all have the same 30-year rhythm. And we're kind of like right at that point where on a rate of change basis,

on a 10-year rate of change basis, value and small and commodities and non-U.S. should start to take the baton from the big grower. So in that sense, I think a regime change seems to be underway indeed. That was the best financial history lesson in five minutes. I think I've ever heard, honestly. And so just to pull in that string a bit, if you think we are in possibly in this regime change, how do you think equity investors should be positioned going into 2023? What asset classes do you prefer?

Is it the value small cap commodities that you just referenced? Yes. I think the market will almost by definition, based on what we just talked about, will broaden out. I mean, if you have five Fang stocks and they're 25% of the market and those are outperforming, you don't really have to look very much further than that. You could just buy an index fund or just buy those stocks. But when you're on the flip side of that and think back to 2000, 2001 when the dot-com bubble burst, and I'm not suggesting the overall market is going to follow the same route because that was a 53% bear market,

which is something I'm definitely not expecting this time. But you had a market that went down or sideways, and there was a lot of breadth in the market. So all those names, all the styles, values, small commodities, non-U.S. All did extremely well. And that, of course, also was when China entered the WTO. So you had the whole EM investing phenomenon really take off into 2000. So we're obviously much further down the down the path on EM. But I do think 2023 and beyond will be a period where it'll become more of a stock pickers market,

more of an active management type of market, where you have to look beyond just that core group of really large companies. And so, you know, we're already seeing this, but non-U.S. equities, for instance, are performing very well. And one of the reasons is, of course, is that the dollar is down and the dollar plays a large role in currency translation. But the other one is that the global cycle has become more fragmented. You know, the U.S. is now in late cycle, possibly heading into a recession. We don't know, but you look at the yield curve.

You look at where the Fed is going to take rates relative to, you know, R-Star or the natural rate of interest. every time it's done that in the past, you've had a recession. So a recession call is something we can't ignore. Maybe it happens later this year. Maybe it's only shallow, who knows. But this is where the U.S. cycle is. And on the other side, you know, China is now finally reopening after three years of COVID.

Like, you know, we reopened a long time ago. China's been relatively locked down the whole time. And now they're reopening in a big way. I mean, I think the latest I heard was that by March, the entire economy is going to be completely, freely operated in terms of movement. Obviously, we have to worry about the human toll because a lot of people there haven't gotten COVID and they're going to get it. They're also going to start traveling, so we have to worry about where else it ends up going. But that's a different dimension. But in terms of where the market cycle is, you have a period where China is, it's now.

going to be creating that economic tailwind, even though the U.S. is on the other side. And that creates opportunities to be invested in emerging markets in China, assuming China is investable, which is another maybe a conversation for another day. But you see that fragmentation. And then you look at the level of interest rates. Eventually the yield curve will start to steepen again. That tends to be good for banks. Energy stocks are still very, very cheap. So there's a lot of things that look interesting. And actually, even bonds look pretty interesting because they actually finally offer a real yield again. We can talk about the correlation between the 60 and the 40 going forward over the very long term, because that correlation tends to only be negative during periods

of low inflation. And we don't know where the inflation question is going to end up settling. But I think in 2023, bonds will actually offer a good insurance policy if we do end up having that other shoe dropping, which, you know, again, we don't know if it will. But at least it provides viable insurance now that the valuation across all these NASA classes has reset. Coming up after the break, Jason Moser and Matt Argusinger are coming back. We're going to dip into the full mail bag and they get a couple of stocks on their radar. So stay right here. You're listening. to Motley Fool Money.

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 Matt Argusinger and Jason Moser. Our email address is Podcasts at Fool.com. Got a question from Amelia in New Hampshire who writes, you often talk about CEOs on the show. If you could shadow a CEO for a day, who would you pick?

What would you hope to learn? Matt, who are you going to follow for a day if you could? I love that question. I think right now I'd go with Steve Schwartzman over at Blackstone. I love real estate. I love the alternative asset space. And Blackstone has reached in so many places. I would just love to know what he's thinking about the market, certain investments. But I also just would love to be in a room where analysts at the Blackstone are pitching him ideas, which I think happens on a weekly basis. I think that would be super fascinating. Jason, what about you? Yeah, I think I'd go with Josh Silverman and Etsy. I think he'd be a fun one because, you know,

he's helped build this tremendous network that ultimately has to serve so many different stakeholders. They took on the Amazon challenge with positive results. But ultimately, back to the stakeholders thing, you get the customers who buy from Etsy, but you also have the merchants that sell on the platform that the company has to serve. They have to build out this tremendous tech infrastructure. They've got a phenomenal mobile presence. What's the philosophy on balancing the two, site design, how far forward thinking are they? How do they act on that? It just seems a very interesting business. It's very customer-centric and a lot of moving parts there to sort of understand better their decision-making. I would follow Howard Schultz at Starbucks.

You just want to freak off. I want to go to the roastery and I think he'd be a good tour guide, but also as a shareholder, I just, I would feel compelled to ask him like, this is the last time, right? Like, this is the last time? Just confirm for me. When you step away in April, this is really the last time. Oh, man. Question from Doug in San Francisco. For as bad an investment as it's been over the past year, crypto still seems to get a lot of attention from the financial media.

What is a topic or trend that you think we should be paying attention to instead? Matt, what do you think? Doug, anything but crypto. I mean, there are just so many productive businesses, productive assets. And so why I spend so much time on something that really just, I think, has no interest intrinsic value to it. For one, I'd focus on companies that are paying dividends and growing dividends. That's real cash. And I mean, real cash in your pocket. Jason, what about you?

Yeah. I mean, I think first, crypto gets a lot of attention from the financial media because they pay for it, right? I mean, you see all of the advertisements every day. I mean, they're paying for those advertisements. Well, they've got to talk about it on the shows. So that's kind of part of it there. For me, I mean, I run a service. I run a service, One of the services I run here is focused on 5G and connectivity. So obviously, I like that, but I would actually even take it one step further to go beyond just 5G. Talk about 6G.

Talk about the inevitable 7G, right? The capabilities these networks will open up. It's just such a broad universe of opportunity and connectivity enables so much that impacts so many around the world. It just seems like an endless conversation. Keep the emails coming. Podcasts at fool.com is our email address. That's podcast at Fool.com. Really appreciate it. Great questions. All right. Let's get to the stocks on our radar.

Our man behind the glass, Rick Engdahl is going to hit you with a question. Matt Argusinger, you're up first. What are you looking at this week? Chris, I'm going to go with Regions Financial. The tickers RF. It's just a really well-run regional bank locations mostly in the south and Midwest. It was in fact the best performing S&P 500 bank in 2022. Q4 results just came out this Friday morning. You had net interest income up 11%. 3.99% net interest margin. That's up from 2.8% last year. It's also a dividend night, if you know what that means.

So not only has it raised its dividend by more than 10% per year over the last 10 years, it's also beaten the S&P 500 during that span. So just a lot to like about this bank. I like the fact that you're bringing in a regional bank because we give a decent amount of oxygen to the big banks. It's always worth remembering there are regional banks out there. as well. Rick, question about Regions Financial? Yeah, about those regional banks. How many banks are there out there? It seems like there's

the big banks and there's all these regionals all over the place. I mean, how many banks do we need? Small local banks? Yeah, there's hundreds, Rick, and, well, thousands if you count branches, right, but just hundreds of bank companies. And I think that is a good point. There's definitely room for consolidation. And I think Regions Financial, in fact, could be a bio candidate itself. Jason Moser, what are you looking at this week? Chris, I always liked Mr. Furley, but this week I'm going with Roper Technologies. Ticker is ROP. Roper Technologies actually collection of many businesses that focus on everything from software

to medical and water products. They are smaller companies that really specialize in niche markets. And so that makes for growing switching costs over time, ultimately gives them a little pricing power and gross retention rates greater than 95 percent in many cases. You look at the business itself. From 2012 through 2021, free cash flow grew at an annualized rate of 13.4%. Ten-year total returns on this business right now, 300%, almost doubling up on the market over that period of time.

Earnings come out on Friday, January 27th before the market opens. I will be interested to see what they have to say. Rick, question about Roper Technologies? Yeah, you know I do a lot of research before asking these questions. And I went over to the Roper website, and for the life of me, I could not find anything about what this business does. Who the heck is this company for? Rick, I just told you what they do.

I'm sorry, I nodded off. Wasn't that? Oh, okay. Well, that sounds like a Rick problem, not a Jason problem. I have to say, before I go back to Rick, I have to say, it always kind of blows my mind. I mean, Matt, you mentioned P&G earlier and how long that company's been around. Roper Technologies started in 18-19. 90. Maybe I shouldn't, but I am impressed by businesses that have that kind of longevity.

Rick, what do you want to add to your watch list? I think I have to go with at least something where I can envision the building. So, I'll go with a little bank. I don't know if they're going to take offense to being called a little bank. I don't know. Matt, what do you think? It's a big bank, the 26th largest bank in the country. But I agree. Relative to J.P. Morgan, it's a small, tiny bank. Matt Argusinger, Jason Moser, guys. Thanks for being here. Thank you.

That's going to do it for this week's Motley Full Money Radio show. The show's Mixed by Rick Engdahl. I'm Chris Hill. Thanks for listening. We'll see you next time.