Motley Fool Money - Billions in Lost Business

Episode Date: July 26, 2024

We talk through the estimated $5B in lost activity across banking, travel, and other industries due to Crowdstrike’s faulty update and the $30B shaved off the company’s market cap.  (00:21) Jason Moser and Matt Argersinger discuss: - The impact of the global IT outage, where it will show up financially and how Crowdstrike responded. - Why the market is down on Tesla’s profitability - How Spotify’s stellar run is continuing and why dividend investors might want to keep an eye on UPS.  (19:11) Motley Fool co-founder and Chief Rule Breaker David Gardner talks with Emily Flippen about his best stock recommendation, some of his best investing lessons and how to make sense of the nascent artificial intelligence space. (31:18) Jason and Matt break down two stocks on their radar: Twilio and Coupang. Stocks discussed: CRWD, MSFT, TSLA, CMG, SPOT, UPS, NVDA, TWLO, CPNG. Host: Dylan Lewis Guests: Matt Argersinger, Jason Moser, David Gardner, Emily Flippen Engineer: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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We're sifting through the wreckage of the world's largest IT outage. Motleyful Money 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 Matt Argusinger.

Fools, great to have you both here. Hey, hey, Dylan. We've got some ideas for how to spot winners in the world of AI, a check-in on our endless love for burritos. and, of course, stocks on our radar. We're going to kick off, though, with one of the biggest stories of the week, probably one of the biggest stories of the year when it comes to the intersection of tech and business.

The global IT outage related to crowd strikes updates started last week, but continued to dominate headlines and travel schedules this week. Matt, how did your trip home from Boston go this weekend? Yes, let me briefly relive this nightmare that my son and my five-year-old son a night experience. We flew to Boston last Thursday to visit my mom. Coming back, our flight was scheduled from Logan, Boston's Logan Airport, back to D.C. Sunday at 1.30. So we got to the airport around noon, and everything looked fine. But then our flight just continued to be delayed. It was delayed every half hour for, I don't know, 16 half hours until about 8 o'clock when it was

finally canceled. And it was a crazy situation. I mean, there were obviously a lot of travelers that had a much worse experience than us. But when our flight was finally canceled, you know, they rebooked us on a flight for all the way until Tuesday evening. I took that, but then canceled it and decided to just get us a hotel in Boston that night. And we took the Amtrak home early Monday morning. I will just say that experience was bad and frustrating, but not nearly as frustrating as some travelers who had been staying at Logan for days trying to fly out. And one of the most interesting things is when I talked to the Delta Rep finally, after standing in line for an hour to figure out our situation. I asked him about, well,

can I get reimbursed for a hotel or a hotel night? And he said, well, once we get reimbursed by the vendor, that's when Delta will start, you know, reimbursing travelers. And I thought, wow, okay. So now take my experience, multiply it by, you know, several hundred thousand, if not millions of travelers over the past week who have had their flights canceled, had to rebook, had to book hotel nights. And you can see why this could run into the billions, just on the airlines alone. just on Delta alone, let alone all the thousands of companies and millions of other customers around the world in various industries who have been affected by this outage. So it's a big deal. I was trying to access my accounts with Schwab with our 401K over the weekend. That was the

extent of the issues that I ran into, not nearly as bad as hours and hours and hours at the airport with a young kid. But this was probably most severely felt by our airline travelers, but something that was widely observed. You were kind of hinting at this a second ago there, Matt, but we're seeing estimates that Fortune 500 companies lost something to the magnitude of $5 billion due to the outages. Banking and airlines, not surprisingly, leading the way when it comes to that. And I see that number and just the widespread impact that we saw with this, Jason. And I feel like this is probably the kind of thing we're going to be hearing about from management teams on conference calls.

next earning season as we're starting to see some impacted results. Oh, I suspect you're right. Thankfully, I didn't have the travel snafus that Maddie had to deal with, but I mean, you made the point of banking. And banking and payment systems were absolutely impacting. My wife runs a small business here in Northern Virginia and the state tax website was down. They had to delay, essentially, the deadline for payments being due because, you know, the tech broke. They couldn't accept payments and they couldn't record the payments that were being made. So they had to push that out like five days. So that, it just throws a monkey wrench in everything, right? There's lost

money, there's lost business, there's lost productivity. And it does, given the scale of this, it feels like there are going to be more shoes to drop. I mean, this is just too big of an incident. And it's very, very likely that CEO, George Kurtz, will have to testify in front of Congress. So we'll get a better idea as to what happened there. I mean, I think it seems the response to this point, I'm going to say on the whole, it's probably not satisfactory for most people. I also understand this is a unique situation, and I don't know how exactly you respond to this other than, holy cow, let's just get this thing back up online as quickly as we possibly can

and take our medicine. So Jason's going with a not satisfactory grade for CEO, George Kurtz and Crowdstrikes response. The market, obviously agreeing here, shares are down about 30% as we tape, still up 5% for the year, but certainly a hit for this business. Matt, having been there in the airport, what's your grade for how things have been handled? I'd say it's pretty bad. If the rumors are true that they were offering $10 gift cards for customers affected by the outage, yeah, I think pretty unsatisfactory response. I would say this, and I want you guys maybe to react to this, and maybe I'm being hyperbolic here. But I do wonder,

If you look at companies like Microsoft, CrowdStrike, which we've talked about, Apple, Amazon, we run banks through stress tests, and we have deemed certain banks too big to fail. Isn't it possible that maybe not today, but in the near future, we're going to pinpoint a few companies and say, you know, these companies are just so big. They affect so much of our digital infrastructure, our transactions, our communications, our security. billions of customers around the world, are there going to be companies, tech companies that are too big to fail? And we might actually have a, I don't want to say a wave of regulations, but we might just have more scrutiny on these companies because they really do. I guarantee you the average

American didn't know, does it know crowd strike. Maybe they heard it a little bit, but it's not like the same as an alphabet or Google or Amazon or Apple. But look at the effect that this business had on so many people's lives over the past week and still having an impact. So I wonder if this company just got too big and it's been too influential. And we might need to step back at some point and say, you know, we do have some tech companies that might need to undergo a few stress tests here and there. I think, you know, to your point, they're on CrowdStrike. You're right.

Probably most people don't know CrowdStrike. Most people do know Microsoft. Microsoft kind of got dragged down with this one, right? This wasn't really their fault, but it impacted something like 9 million of their devices in operating systems. So you got to feel for Microsoft in that regard. But I think in regard to too big to fail, I think we're already there. I mean, I think you could argue that if Microsoft or Alphabet or Amazon were to just shudder their doors,

any one of those three or some combination thereof, I mean, the entire world stops spinning, right? Yeah, Jason, it doesn't even have to be fail. It's like too big to screw up or too big to break. And I will say, too, just following up on that $10 gift card because I think we all had a lot of, we had some laughs in regard to that. And it honestly read like an onion article. I did find something, so apparently CrowdStrike, the company said they didn't send gift cards to their customers or clients, but they did send them to teammates and partners who have been helping their customers through this situation. And then adding insult to injury, Uber flagged it as fraud because of high usage rates.

Everything just hit it once. And so they're like, oh, this must be fraudulent activity. And they basically cancel off these cards. So I'm not exactly sure. Again, I think this just kind of speaks to the communication, right? There are a lot of questions that are just unanswered, and I think that's where you look at Kurtz to you want him to step up and maybe be a little bit more of a leader in this case. Seems like CrowdStrike is very excited to turn the page to August and put July behind it.

Also, down this week, shares of Tesla stock was down about 10% after the company reported second quarter results. Revenue was up slightly to just over $25 billion, but JMO, net income, cratered down 45% year over year, a huge hit. Were you surprised to see it? No, not really. I mean, it's no secret that demand is waning in the EV space right now. That's probably a lull. I think it's hard to argue against the long-term electrification of our transportation system. But I think, you know, Musk lays out the thesis for us, and you either buy into it or you don't. Or maybe you just kind of do, but you don't really want to wait so long. I don't know. But, I mean, he says the value of Tesla is autonomy. And if you believe Tesla will solve

autonomy, you should buy Tesla stock. And all of the other questions are just noise. And so that really is the North Star. And so you have to be able to think a little bit longer term. Unfortunately, in the near term, I mean, this is a car company, and automotive revenue is down 7% thanks to that weakening demand. I did see something in the Wall Street Journal earlier. Industry-wide, the sales of battery-powered vehicles in the U.S. rose 6.8% of the first half of this year, according to motor intelligence. That compares to 50% growth in 2023. So clearly, a very big slowdown there. The good news is energy generation and storage was up 100%. I mean, that's great news. Right now, it's just 12% of the business. It's not a big deal right now. But longer term, I think,

given the trends on the demand for electricity, not only here in the U.S., but globally when it comes to transportation and data centers and whatnot, obviously energy is going to be a big story in the next several years. All right. Coming up after the break, we've got updates from Chipotle, Spotify, and UPS. Stay right here. You're listening to Motleyful Money. The old adage goes, it isn't what you say, it's how you say it, because to truly make

an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport. The Rangerover Sport blends power, poise, and performance. Its design is distinctly British and free from unnecessary details, allowing its raw agility to shine through. It combines a dynamic sporting personality with elegance to deliver a truly instinctive drive. Inside, you'll find true modern luxury with the latest innovations in comfort.

Use the cabin air purification system alongside active noise cancellation for all new levels of quality and quiet. Whether you prefer a choice of powerful engines or the plug-in hybrid with an estimated range, of 53 miles, there's an option for you. With seven terrain modes to choose from, terrain response to fine-tuned your vehicle for the roads ahead. The Range Rover event is on now. Explore enhance offers at Rangerover.com. Welcome back to Motleyful Money. I'm Dylan Lewis here on air with Jason Moser and Matt Argersinger. We had a big week of earnings for big burrito, big streaming and big shipping. We're going to start out with the tasty one. Matt, people love burritos. People will always love burritos. And Chipotle is just going to keep cruising along. This seems like a business that can do no wrong right now. That was my take,

at least, on the earnings results. That's my take, too, Dylan. I mean, this is impressive. A company that now has over 3,500 company-owned restaurants. Revenue was of 18%, but comparable store sales, up 11%. And there's an 8% growth in transactions at the store level. Margins were higher by about 140 basis points at the restaurant level again. They remain on track to open 300 more restaurants this year. I just think outside maybe, I don't know, Kava, maybe ShakeShack, but those companies aren't nearly as mature or have the scale of Chipotle. Chipotle is the best restaurant growth story out there right now. I think I can safely say that. I would say, as Ron Gross would say, this one is firing on all cylinders. And they're doing it internally with store metrics and externally with store growth.

I mean, it's really impressive. I just think, you know, the stock sold off a little bit after Erdings, and it's down, I think, about 25% over the past month or so. It's like everyone bought into the split, and then once the split happened, everyone's sold off. But largely, I think it's more evaluation. At its recent peak, it was trading for about 75 times earnings. That's a rich valuation, even for a company that's performing like this, even with the stock down 25%, as I mentioned, it's still trading for about 50 times forward earnings. So I love what Chipotle is doing.

I just think that's still a very, very rich valuation. So that's probably why it's down, so just buyer beware at this point. But gosh, is it doing well? To the extent that Chipotle is a little bit of a bellwether for us as we look at different types of consumers, interesting to see them performing so well while we've seen so many of the other fast food names struggle and become so much more value-oriented with their menus and with their offerings. I agree.

I think partly it's probably Chipotle's innovation, the quality of their products. They've been able to have their price increases stick much better than your average fast casual restaurant. Look out for the Olympic opportunity here, too. I know that sounds weird to say. We grew up in that eight, or at least I grew up in this age. I guess I'm a little older than you guys, but we won't tell anybody. But, you know, growing up at that age where McDonald's was the name for the Olympics,

which was always so weird to me. Now, Chipotle, you know, they're jumping on that Olympic stage. Their line is real food for real athletes. They're actually even releasing a digital menu of items that reflect the favorite orders of a number of different Olympic athletes that will be in action this summer. I know the valuation's crazy. At 3,500 stores today, though, according to them, they're only halfway to the 7,000. They think they can get.

Even if you discount that back out, you can start to at least rationalize the valuation a little bit. I'm not there yet, but it starts to make a little bit more sense. We also had an update from another company that's been flexing some of its pricing power. Music streamer Spotify, continuing a great week, great quarter, great year shares up over 10% following the company earnings, this release. Jason, what did you see in the results? I feel like every time we talk about Spotify now, Bill Mann's just going to reach and punch me through my laptop or something. It's because of these price increases, right? I didn't mean to do it, Bill. I was just trying to make a point. But clearly, they have benefited from these

price increases. I mean, look, see, spot run. I mean, this stock has just been on fire. And I start to wonder if maybe they've mature, maybe they've made that leap beyond that monthly active user number, right? It's gotten so big. It's less a question of whether they can grow that user base and really just more of a question of how profitable they can ultimately make it. They added 7 million net new subscribers for the quarter. That was one million better than they forecast. But at 626 million users now, that was a little bit below what analysts were looking for. The stock still didn't get punished, though. And I tell you, the reason why revenue grew 21% from a year ago. The recent price increases have absolutely

help the bottom line and with that premium average revenue per user, that grew 300 basis points. Gross margin. One year ago, 25 and a half percent. This year, 29.2%. Those are the metrics that matter, and you like to see them trending in this direction. So I do wonder, again, if we're not going to see them maybe try to pull a Netflix here in the near future and say at some point, they're just going to not worry about reporting those average user numbers, those monthly active user numbers, because they've gotten to the point where they're so big, it's just not as important as it once was. It's kind of a nice time to check in on them because we are almost back to the 2021 highs that the stock hit. The company has performed incredibly well to rebound and get back to that point.

But, JMO, I think we're looking at a slightly different Spotify now than when they were last at those levels. They have used some of those price hikes and pricing power we talked about, but they've also rolled out things. and establish their ad brand a little bit more. What do you see as some of the needle movers for this business for that next chapter of growth for them? Well, they talked about this miss, quote unquote, in users. And a lot of that, management chalked up into lumpiness and developing markets. I think we focus on those developing markets and the opportunity there. It's kind of a step-by-step. They get folks in on that ad model and help hopefully graduate them up to monthly premium paying subscribers.

So paying attention to those premium subscribers, I think is always going to be very helpful. But I will say in regard to the price increases, it's nice to see that with those price increases come a much more robust platform, right? Spotify does more now than it's ever done with books and podcasts and music and everything else in between. So it continues to build out what really is just becoming an entertainment platform. All right. We had some big moves in the other direction for UPS after earnings, shares down 10. percent this week. Matt, you did the dive into the results. What did you see? Not a whole lot of

surprises, Dylan, because we, Anthony Chavone on our dividend investor service, did a good analysis of this business. We were thinking about recommending it for our dividend service. And we were just worried about results in the short term. And so I'm glad we held off. The CFO also abruptly left about a month ago, which was a red flag for us. So UBS is dealing with a really delicate balancing act. They're trying to reshape the entire business right now, take a lot of costs out, At the same time, package volumes have really slumped. You've got customers going to cheaper ground services, so revenue's been flat to down. They've also front-loaded a lot of the Teamster contract costs, and so that's why earnings are down 30%.

I think what's hopeful is, if you look at going forward, they did have a slight pickup in volume. That was the first time in nine quarters that they've seen that, which is pretty amazing. They are on track to take about a billion dollars in costs this year. They offloaded their coyote logistics business, which they thought was non-core. They seem to get a better price than what they're hoping for. So, and the stock is at a five-year low, and the dividend yields over 5%. So is this a potential bargain on a turnaround? I think it just might be.

It trades for only 14 times the consensus earnings from next year. If they can turn around, if volumes can rebound, they get a lot of costs, they write their cost structure. This starts to look like an interesting opportunity, maybe. So there's kind of two pieces to this. there's a little bit of the macro environment in general, but also some UPS-specific things that they need to be getting right in order to move from watch list to something you'd want to own? Right. So I think it's the latter that I'm more focused on. I think the macro we know will bounce back or do what it does. What's in UPS's control is what I'm focused on, what we're

focused on in Dividend investor. And I think by the end of this year, we'll have a good idea of whether or not they've succeeded. I mean, you see a 5% yield. You've got to check it out, right? It's perk my ears up. Hey, listen, I'm hanging on to my shares. I can tell you that. All right, Jason, Matt Fools. We're going to see you guys a little bit later in the show. Up next, we've got some investing words of wisdom from none other than Chief Rule Breaker

and Motleyful co-founder, David Gardner. Stay right here. You're listening to Motleyful Money. Righting on the city of New Orleans, Illinois Central, Monday morning, Monday morning, rail being cars and 15 restless riders, reconductors, 25 sacks of mail. It's Motley Fool Money.

I'm Dylan Lewis. We've been bringing you some of our favorite conversations from Pool Fest 2024 over the last few weeks, and our member meetups wouldn't be complete without some words of investing wisdom from Chief Rule Breaker and Motley Fool co-founder, David Gardner. Analyst Emily Flippen sat down with David to hit some questions source from the crowd

and our in-house AI chatbot, Jester AI. They talked about his best stock recommendation, some of his best investing lessons, and how to make sense of the nascent artificial intelligence space. I have to ask, since we're talking about artificial intelligence, and you just told me that you're all in on artificial intelligence. I work on your stock advisor team, David. And I know that Nvidia, which I'm sure everybody wants to talk about,

NVIDIA, getting a lot of benefits from the artificial intelligence boom, is now one of, if not your best, stock advisor recommendation in terms of performance. David, what are your thoughts on Invidia? When you look at that performance, what is your cost basis? First of all, I'm very curious. I can't help but wonder.

And when you look at the landscape of investors, what would you tell an investor who maybe owns Nvidia and has owned Nvidia for a long time? And what would you tell an investor who does not yet own Nvidia and is looking at Nvidia and thinking to themselves, should I be owning Nvidia? So I would feel very comfortable buying Nvidia tomorrow

and we're holding for at least three years because that's true I think of all Motley Fool investing but I'll at least specifically say of rule breaker investing a dead minimum of three years. I wouldn't buy any stock including NVIDia if I weren't going to hold at least three years and I would feel

comfortable doing that tomorrow and NVIDIA is an amazing 2005 roller coaster story and I've occasionally told this on my podcast, and some of you have been there all the way through, but to think of the five years that it went sideways, eight years after the original recommendation, we finally got back to even. As I stepped away from stock picking in May of 2021, it was at 15. So I walked away, and it just kept going out to the 128, my best pick ever.

I didn't know when I stepped away in May of 2021. But my cost basis, thanks to the most recent split, is 16 cents. And what I love about that, thank you. I mean, it deserves a clap. Two things you need to know about that. First of all, I don't own any. I love the company. I love the pick, and I own so many of the stocks I picked over the years.

But not all of them. I didn't want to fill up a portfolio more than about 60 stocks or so. So, but the second thing I want to say about that is, why do we do this? Why does Emily do this? Why do my brother Tom and Bill Mann and Andy Cross and our whole motley, it's for you. We're picking the stocks for you. So I am just so happy that 16 cents for those who were there, and it was April 15th, Tax Day, 2005, if you were there with me, that we bought and we've held. And I think there's a little magic around 16 cents because I hope this will be my only brag, but

if I brag again, you can give me the sign. But that's poetically, poetic justice, that is the same cost basis as my Amazon pick of 1997, 16 cents. And so as they split together, 20 for one, it all ended up to this magical place of 16 cents. Wow. Feels like it's not, doesn't it?

It was meant to be. But again, I think, this is a great example of a rule breaker, a company that is leading the charge. It is the top dog and first mover. It wasn't in 2005. Companies evolve and adapt and morph, but it certainly represents that, as you well know today, Emily. And so it also looks overvalued and they always do all the way up. And sometimes, as NVIDIA has, even in the last few years, it'll lose half its value.

Time and again, that's happened a bunch of times. Anytime you want to ride a hundred bagger, it's never straight up. It's going to be, you're going to be. to have three or four cut in half, death-defying moments over a 20-year period. That's been true of Nvidia even more so than most. But anyway, that's a quick thought on NVIDIA, a stock that it makes me so happy to think so many fools. I will say, as I'm reading through these questions, it does feel like ChatGBTGPT

is very self-serving with these questions. They're all about generative AI and technology. And, you know, I think the Chat-GPT is really trying to point us in a direction here. But I do have to ask because, again, TATGPT has told me too, so I am obligated. Throughout your career, you've seen the rise and fall of many technologies and business models. How has your approach to identifying truly disruptive companies evolved over time? And can you share an example of how a past experience has reshaped your thinking? Sure.

So I think, first of all, in the earliest days, as a stock picker, I thought it was all about finding the company that Wall Street hadn't discovered yet. And so I was looking for small cap companies in niche industries that in my mind would grow and be discovered by Wall Street. And then the coverage and the ensuing attention would cause it to do really well in a very short term 18-month period that was sort of my targeted length of time. That works once or twice, but it didn't work eight or nine other times. And I started to think, you know, I need to evolve to find what's really working and winning. I think William O'Neill's book, How to Make Money in Stocks, I've said this before. It's one of the greatest and worst books ever written about investing. Why it is great is because O'Neill said, let's look at what actually wins out there on the market.

He went and studied market history, and he wasn't putting up principles and saying you should abide by these. He was looking empirically at what actually went up 10 or 25 times in value, and what were the factors that led to that. And so I guess I started to realize that I needed to focus on what's really leading and winning, not things on the bleeding edge of nowhere that might get discovered one day. And so that's why all of a sudden America online was my first great stock. It was the decade that America came online. Eventually it kind of transitioned out, bad, awkward merger with Time Warner, Steve K's hanging out with Jerry Levin and not really getting along. and eventually broadband overtaking.

But that was, for me, the iconic learning that I've tried to share out with everybody here and many other people besides, that you should always be, if you're not the lead Husky, the view never changes. We should be asking, who's the innovator in every industry? And every industry has innovators. The trucking industry, which we wouldn't think of necessarily as high-tech, absolutely has innovators. Old Dominion Freight Line, such a great company. A wonderful stock advisor holding of many years is a great example of understanding how to do logistics in a way that it's hard to compete with if you're competing against them in trucking.

That's an example. So in every industry, Emily, I think that's the learning and takeaways. Focus. If you could just stock a pond with the single most innovative at scale company in every single industry that you want to identify that you care about, and only fish there, you are fishing the most stocked pond that you can. can find as an investor, and it's so much more valuable than I would say merely indexing or buying everything. Let's just buy excellence. Find excellence. Add to it over time. And so that's what I learned early on. And it took a Yahoo mistake and then an AOL realization to turn me on to that for life. As you were talking, I'm sitting here trying to think about how you would answer this

question. I can't answer this question. I think if we had Tim Byers on stage, he would be unable to answer this question. I'll pose it to you. But I genuinely don't think you're going to be able to give a satisfying answer for exactly the reason you just mentioned, which is that we have not seen the industry of AI shake out yet. The Netflix's of AI do not yet exist. But the question is this, what do you feel is the most important three things that make a company, a moat company, that a younger Warren Buffett would look at in the current AI world? And perhaps I have artificially led you in a wrong direction. And you do have three factors. that come to mind. But for me, I just, it is hard to come up with factors in an industry that is

so nascent. And I go back to maybe your six role breaker investing principles, which I continue to believe will be prevalent, regardless of the technology that continues to develop, that continues to guide at least my investment philosophy. But what comes to mind for you? So thank you. Yeah, I do use those. Part of the fun of writing my final investing book is a portion of it is simply a restatement of what I said 25 years ago, but now we have numbers attached and we can learn from it. It's not just supposition. And so I do lean on those principles every day. And so I would start with, you know, who's the top dog and who's the first mover in important aspects of AI growth in society. Jason Free. Jason, you hear? Awesome. Jason was saying something really smart last night. He's

like, you know, and I don't know enough. He's studying this much more than I, and I've learned a lot from him over the years. He said, you know, I really think that AI in some ways is, you know, We don't know this yet, but it's really seriously accelerating. I hope I'm not misquoting you, Jason. It's accelerating robotics. A lot of the gains and the rapid cycles that we're learning is going to end up being in machines around us. This is for good, not ill. And obviously, that's just one use case for AI.

But you start putting together all of the gains being made by AI, and you start putting it into machines that are helping us and making our lives easier, whether you can't walk but now you can or get heavy work done in industrial dead zones that nobody would have wanted to go into. These things are unbelievable benefits that we're going to get. So I would say that that one right there, Emily, just asking who's the leader out front, a second one since there are three, and I'll be quick, I might say, you know, the intellectual capital, the founder, the visionaries, the dreamers.

I love the people like Brett Schulman today who have been there, done that, built that. and you can see it in their eyes. I don't think I have any third-eye vision, but hearing people articulate what they're doing and why especially, trying to work on behalf of humanity and human flourishing. And you just see those founders. So I look for those visionaries.

Robert Frost said, I had a lover's quarrel with the world. That was one of his poems that's on his gravestone. I love the people who have a lover's quarrel with their industry. They show up and they say, we're going to start breaking the rules here. People don't like this or that about what we're doing. So let's instead do it this way. And they do.

So that's a second thing. And then a really third thing I might throw in is financial backing. You can kind of see it in who's being funded and how much. And yes, there are stories that come out of nowhere. And part of AI will be that a four-person shop all of a sudden can create $10 billion of value when it previously took 40,000 people to do that. I think some of that will pop up and surprise us. But those are three things that I'd look at.

and they're already there in the Rule Breaker trades. David mentioned his podcast. You can catch him each week on Rule Breaker investing. As for his next investing book, you're going to have to wait a little bit for that. But as he mentioned, it's a collection of his wisdom and writing over the years. So the RBI podcast is a great place to get a sneak preview. Coming up after the break, Jason Moser and Matt Argersinger return with a couple stocks on their radar. Stay right here.

You're listening to Motley Fool 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 anything based solely on what you hear. I'm Dylan Lewis, joined again by Jason Moser and Matt Argersinger. Pools, all traditions eventually have to come to an end. After more than 50 years, Airlines Southwest plans to end its open seating approach and begin selling tickets with assigned seats and premium seats with extra legroom.

Jason, did you ever think you would see the day where you could safely and slidly to your Southwest gate without having to jostle for a seat. Wow, I'm not terribly surprised they're at least doing this. I mean, I will say, I've only flown Southwest, I think once in my life. And that was to a full event out in Texas. And so being so new to the concept, I will admit, it was a little bit confusing. There were some adjustments that needed to be made when I was boarding the plane. I was like, this isn't like all of the others.

And I wasn't really sure whether I liked it or not. I was like, it's different. Okay, that's fine. Whatever. I will say on a serious note, I mean, this is something that I think is very important here with, in regard to why they did this. You CEO, Bob Jordan, mentioned that the airline surveyed thousands of customers to understand ultimately what they wanted, what they liked the most.

And 80% in that survey, 80% favor to sign seats. And so while maybe that old school mentality loved the unassigned seating and the way it worked, you've got to be able to change with the times. And clearly, consumer preferences have changed a bit given these survey results. So I will say, I do give them a lot of credit for committing to making this change, because ultimately, when you're in a business, you're selling consumers things, whether it's burritos or plane tickets, you just want to be giving your consumers what they want. And they found out what their consumers want. They're making the change. Matt, you're fresh off of some chaotic air travel. So I feel like the idea of the idea of,

of something that is a little bit more predictable, probably going to land with you here. Predictable would definitely land with me to use the airplane pun, Dylan. But gosh, if I don't see the inside of an airplane or an airport for another month or two, I am a happy guy. Wow, a month or two. Gee, I think I'd be screaming like six months to a year. I got the travel bug always, though. I mean, it is kind of interesting because Southwest has been feeling a little bit of heat from activist investor,

Elliott Management. Jason, do you feel like this is an adequate, answer to some of the concerns that they've been raising about the business? I mean, I think it's a step in the right direction. I'm not sure how much sway Elliott really holds in something like this. And I'd like to believe that Southwest is doing this because it's what their customers want, not what Elliott wants. But sometimes it takes that little push, right? That little nudge to make things like this happen. And so I'd imagine Elliot getting involved there caught management science that, hey, maybe we need to start

thinking about doing things a little bit differently. And this was a very sensible, sensible first step. All right, let's get over to stocks on our radar. As always, our man behind the glass, Dan Boyd is going to hit you with a question. Matt, you're up first. What are you looking at this week? A bit of a departure for me this week, because, as you know, I've kind of homed in on dividend-paying companies lately, but I'm looking at Ku-Peng, ticker CPNG. It's the leading e-commerce company in South Korea. It also has operations in China, Singapore, and just recently, Taiwan, very popular online marketplace. It has infrastructure that could deliver 99% of orders in South Korea within a day. Very impressive. It also offers groceries,

restaurant order and delivery, payments, streaming service. Does this sound like any other company we know? I'm a little familiar. But I think what's most intriguing to me right now is the company is now profitable. It generated over $1 billion in free cash flow over the last 12 months. It only has a $35 billion market cap, yet it accounts for only about 20% so far of total e-commerce in South Korea. So lots of upside, especially as it expands in those other countries. Just adding it to my watch list right now, I'm looking forward to taking a deeper look. Dan, a question or perhaps a comment on Kupang, ticker C-P-N-G? Yeah, sorry, gang, but I got a question for this one.

I know you like the comments, but... So South Korea has a pretty well-documented population problem, Maddie. Does that spell disaster for a company like Kupang in the future? I think it does limit their growth, Dan. I think it's a great point. I would say the penetration of overall retail of e-commerce is actually even in a country like South Korea, which has a very, you know, sort of advanced e-commerce landscape. It's still actually a smaller percentage than the overall retail sales.

So I still think they still have room to grow even if that demographic situation isn't helping them. All right, Jason, what do you got on your radar this week? Yeah, going to be looking forward to Twilio earnings next week, they announced earnings on Thursday, August 1st, after market closed, ticker is TWLO, and all this talk of the crowd strike outage and all of the trouble that came with it. This is one, you know, Twilio is a cloud communications platform, right? They enable developers to build and operate customer engagement within their software applications. This is something where you would think Twilio may have felt an impact from this.

I don't know, but I'm going to be interested to hear what they have to say on the call in regard to that. Beyond that, this is a business in a little bit of a transition, and it feels like the transition is going pretty well. For the quarter, they're calling for revenue just over $1 billion. That would represent organic growth of 4 to 5%. But they also reiterated their full-year organic growth target of 5 to 10%. So if that growth starts to re-accelerate here in the back half of the year, that would be encouraging, obviously. But, I mean, the slowdown of growth is no, it's nothing new. It's something a lot of companies are dealing with right now.

But CEO, Cozheimer, Ship-Chamler, who's still relatively new to the position, been with the company for a while. But he seems to have a grasp on the business and feels very strongly it's undervalued right now. So they've been repurchasing a lot of shares. And actually, Dylan, for a tech company, bringing the share count down. That's what we like to see. Whoa. And they're moving towards sustainable profitability and free cash flow now, which is encouraging as well.

I think there's going to be a time where the market is a bit more tolerant of companies like Twilio. And if Ship Chandler keeps doing what he's doing, I think that patience for this investment could pay off. A lot of buzzwords in there, Dan. What do you think of Twilio? Well, Dylan, good question. I don't know what to think of Twilio. Extremely whimsical name, but it seems like kind of a boring, almost Ron Gross-esque company. Wow. Well, I like the comments more than the questions, and I'll just leave it at that. So, Dan, are you going to be going with Ku-Pang or Twilio this week? I don't know. I don't know, Dylan. I guess the whimsical nature of the word Twilio, how fun it is to say.

I think that might sway me as inane as that may sound. Dan, you're a comic book fan, though. Coupang! Coupang! Sorry, Matt. You could see it in one of those exploding logos, right? Dan, appreciate you weighing in. Jason, Matt. I appreciate you bringing your stocks. That's going to do it for this week's Motleyful Money Radio Show. The show is mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see you next.