Motley Fool Money - Don’t Sleep on the Dow Jones

Episode Date: May 17, 2024

The Dow’s fresh 40k milestone reminds us that the index isn’t all about industrials, and that it’s caught up with the tech-heavy times. (00:21) Jason Moser and Matt Argersinger discuss: - The Dow Jones at 40k, and a look back at the major companies that have led the exchange as it’s moved from traditional industrials and manufacturing to other industries. - Why the current market environment is helping Walmart reach new customers and leaving Home Depot shoppers on deferral mode.  - The latest addition to Warren Buffett’s portfolio: Chubb. (19:11) Whole Foods co-founder John Mackey talks through lessons learned about life and business and his upcoming book The Whole Story. (35:02) Jason and Matt break down two stocks on their radar: Shopify and T. Rowe Price.. Stocks discussed: WMT, HD, CB, BRK.A, BRK.B, GOOG, GOOGL, SHOP, TROW Host: Dylan Lewis Guests: Jason Moser, Matt Argersinger, John Mackey Engineers: Dan Boyd Learn more about the Range Rover Sport at www.landroverusa.com Learn more about your ad choices. Visit megaphone.fm/adchoices

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We've got Dow 40K. and the latest stock in Berkshire's portfolio. This week's Motleyful Money Radio Show starts now. That's why they call it money. The best thing. Cool global headquarters. This is Motleyful Money. It's the Motleyful Money Radio show. I'm Dylan Lewis. Joining me in the studio, Motleyful's senior analyst, Matt Argusinger, and Jason Moser. Gentlemen, great to have you both here.

Dylan! We've got the stock Buffett's been secretly buying the whole story from Whole Foods co-founder John Mackie, and of course, stocks on our radar. We are going to start out this week, checking in on the market. This week, the Dow kissed 40K for the first time ever. Matt, not able to hold it there, but we will note a milestone when a milestone comes. It is a milestone, and I know it's a meaningless number, right? Who cares? I mean, Dow 39,000, 40,000. But it's a big round number, so I think we should celebrate it. We're in the middle of a bull market. And I have some interesting facts and a few questions for you guys regarding the Dow Jones Industrial Average, which made its debut in May of 1896. Its first

computed average was 41 points. It crossed 100 for the first time on January 12, 1906. Jamo, do you know what the largest company in the Dow was on January 12th, 1906? I don't, but I'm going to take a stab in the dark and just say General Electric. Could be total. Dylan? I'm going to say oil. Standard oil? You got away. You guys are in the general area. It was U.S. Steel. It was the largest company. All right. The Dow first crossed 1,000, big number, on November 14th, 1972, so 66 years later, what was the largest company on January, or sorry, November 14th,

1972? In the Dow. In the Dow. I'm going to take his guest from before and say General Electric. Yeah, I'm going to keep on saying General Electric until like that. Oh, you're going to keep being wrong. It was IBM in 1972. Okay, Dow first crossed 10,000 in the middle of the dot-com, boom, March 29th, 1999.

What was the largest company in the Dow on that date? Cisco. It's a great guess. I'm going to go back to IBM the previous. General Electric, you guys should have back to that. Should have stuck with it. Interestingly enough, Microsoft was the biggest company by Market Cap on March 29th, but it was not in the Dow. It didn't get into the Dow until November of that year. But at that time, GE was still the biggest. All right, Dow first crossed 20,000 on January 25th, 2017. Not a long time ago, what was the biggest company in the Dow on January, 25th, 2017.

I feel like Apple was in there by then. Yeah, I don't remember when they got added. I can't remember the day, but I'm going to guess Apple because I feel like they were in there by then. I'm going to follow J-MO on that one. You guys are right there. Hey, all right. We finally got one.

Apple was added in 2015. So yes, January 25th, 2017, it was the biggest Dow component. All right, by market cap. All right, Dow first crossed 30,000 on November 24th, 2020. So just, gosh, three plus years later. So what was the biggest company on November 24th, 2020? Amazon? I don't know if Amazon was in there at that point.

I'm going to guess Home Depot. Nope, it was Apple still, which was much bigger then, of course, and still the biggest company. Okay, so now we know the Dow first crossed 40,000. Didn't hold it, but crossed 40,000 for the first time on Thursday. What is the biggest company in the Dow right now? Is Microsoft in the Dow? I don't think Microsoft is in the Dow. I don't think so. I'm going to go Amazon. It's Apple. Is it Apple?

It's Microsoft. It's Microsoft. It was added to the Dow. It was added to the Dow. Back in 1999, I think, LA. Now, it was not the biggest company for a long time, but of course, it just recently went past Apple. And so it's bigger than Apple by about 5%. So it is the biggest Dow component right now. So there you go. So what I like about what Mattie's doing here, because one of the things with the Dow is, I mean, we've had, The Dow has had this reputation for so long of being kind of old, stodgy, outdated, industrials, boring, and it's not really up to speed with our tech-driven world today. But I think that's one point to note with the Dow is that it has been, it's evolved, right?

It's become a little bit more relevant to the modern-day economy. And so those days where we kind of issued it, I think those days are over. We can look at it with a little bit more credibility today because of its components. Right, and I think a lot of people will bemoan the fact that it's still a price-weighted index, which feels kind of outdated. It's only 30 components, 31, I think, because anyway, because there's a company that has two classes, I think. But either way, it is still the most quoted index, I think, around the world. If you watch any kind of news, especially if you're not watching business news like we watch, but you're watching kind of regular mainstream news, what's the number they always go to? It's always the Dow.

And so the Dow is up 300 points, the Dow is down with this, you know, it's still very, very relevant. And you make a point with the price-weighted versus the S&P, which is market-cap-weighted. Two very different perspectives. Don't sleep on the Dow, I think, is the takeaway. And also, maybe we need to study up a little bit on the Dow components, Jason. I will put this ad this one disclaimer. All this data, by the way, I pulled from an AI chatbot. I think it's – I fact-checked some of it, so I think it's right.

But don't quote me if you're a Dow historian listening to this radio show right now. We've got some more AI talk coming up in the second segment on today's show. But I want to take us to a Dow company that did not come up in that discussion. and that's Walmart, very much doing its part to lift the Dow this week and help it touch that 40K number. Shares up 7% to a new all-time high, Jason. And that's because company earnings results this week look pretty strong. Yeah, they did. This is an environment where Walmart should shine.

The consumer is becoming a bit more discerning regarding prices and what they're spending. We've seen that just all over earnings season, and Walmart's value tilt, I think, should prove to be a big driver for the company in the coming quarters. When you look at the results, I mean, revenue growth, 5.8% in constant currency. Walmart U.S. delivered better than expected growth. Those comp sales were up 3.8%. They ultimately saw their adjusted operating profit up 13%. So doing a great job of bringing that down to the bottom line. You see operating leverage with companies like these that really do a good job of monetizing that fixed cost base.

Some encouraging statistics, e-commerce up 21%. The advertising business, you've got to kind of dig in a little bit to get some, some context there, but the global advertising business grew 24%. So this is kind of becoming a little bit more of an ad play as well. You like to see them diversify that revenue stream. Inventory's in good shape. And I think the most interesting part, given their presence in grocery, grocery remains a big part. They've introduced a new private label brand called Better Goods. Very much focused on the value side of things. 70% of Better Goods items are priced under $5 that is sure to attract to attract the grocery consumer.

I look at some of the market conditions here, Jason, and you mentioned consumers trading down. Groceries are a huge part of this company's business. Some of these private label initiatives, bringing some things that you can only get from Walmart, seems to me like they are trying to create a longer-term relationship with some of these consumers that are trying them, maybe trading down into them, and then keeping them as customers beyond this more pinched period. There's just no question, and you've seen examples throughout history of companies that have done this very well, right? I think Whole Food stands out is one they've done with the 365 brand.

Look at a company like Trader Joe's, right? Not a publicly traded company, but something very similar in that line. Companies have just done a very good job of building Costco with Kirkland, another great one. So it makes absolute sense for Walmart to try to build that identification a little bit with this Better Good brand, and I suspect it'll do well. Less glamorous results this week from Home Depot. So, earnings ahead of expectations, revenue lagged. Matt, both down year-over-year. Right. Just not a lot to build on here, Dylan. See what I did there? No, no. Comparable store sales continue to decline year-over-year, down 2.8% in the quarter.

It was tough to see both customer transactions and average ticket size lower. Management said there was a delayed start to spring. Can spring actually get delayed? It feels like it's been delayed here. We've certainly been getting the rain. That's a weather argument. I get it. And they also said, of course, and they've been saying this for several quarters now, there's a big ticket items continue to be slow. And that has a lot to do with the tight housing market, with high mortgage rates,

just not a lot of movement in the existing home side, which is keeping renovations down. A couple of things I did like what they had to say, which is management. They did reaffirm full-year guidance. They didn't reduce it like they have been doing. And I like that CEO, Ted Decker, and team, they're really moving hard and fast into that pro segment, really trying to grow Home Depot's market share there. They acquired SRS distribution, which is a big destroyer. to professional customers, primarily who do work in roofing, landscaping, and pool work.

So, slow period right now for Home Depot. I'd like the investments they're making. I think when the housing market does finally turn around, they're going to be in a pretty good position. We were just saying Walmart, huge beneficiary of consumers trading down. I thought it was really interesting, Richard McPhail, CFO of Home Depot, saying they are not seeing customers trading down, and they are not seeing people move to cheaper power tools, cheaper appliances, and they are deferring those purchases. do you feel like there is probably some pent-up demand for Home Depot products once we get to a better consumer environment? Absolutely. I think that's the case. It's all about really getting this existing home market unstuck. And I agree. By the way, power tools, they get old over time. And I think there is a lot of pent-up demand there probably right now.

Yeah, I think he's exactly right. I mean, when you start moving, you buy a new house, rent a new place, Home Depot, and they're ill. Those are the first places you go. And so when this thing loosens up a little bit, I suspect we'll see those transaction and that traffic. number, those singles will start rising again. All right, coming up after the break, we've got dives into AI demos from Google and OpenAI, and Berkshire's latest buy. Stay right here. This is Motley Full Money. These days, I'm all about quality over quantity, especially in my closet. If it's not well-made and versatile, it's just not worth it. That's honestly why I love Quince. The fabrics feel elevated, the cuts are thoughtful, and the pricing actually makes sense. Quince makes high-quality wardrobe

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and you will. Now available in Canada, too. Don't keep settling for clothes that don't last. Go to QI-N-C-E.com slash Motley for free shipping and 365-day returns. Quince.com slash Motley. Welcome back to Motley Full Money. I'm Dylan Lewis here in studio with Matt Argusinger and Jason Moser. Guys, Berkshire's annual meeting was a few weeks. ago, but investors didn't quite get everything that was on Warren Buffett's mind. This week, 13F filing out saying what Berkshire's been buying and selling, and we have ourselves a new Buffett stock. Jason Berkshire disclosed it's been building a position in Chubb, a property casualty insurer. Does this surprise you at all as Buffett stock?

No. Not even a little bit. This seems right up his alley, right? I mean, I'm not even surprised, really, at the size and the investment. A $6.8 billion take, I think, is what I read. I mean, this makes a lot of sense. It feels like Buffett is just channeling his enter Peter Lynch, by what you know. You listen to him. I mean, he said it. Property Casualy Insurance provides the core of Berkshire's well-being and growth. I mean, Chub is one of the largest players in that market.

So it makes perfect sense for Berkshire and for Buffett to go ahead and make that investment there. Chub itself, I mean, it's got a long history. It's a company that's performed very well over time. I was looking at the returns on the stock over the last 10 years. The total return on Chubb is up almost 220 percent, and outperforming the market nicely. So it's got a good track record there. And then, if I recall correctly, this stake, he started building the stake in the back half of 2023.

And so just looking at 2023 in Chub's 10K, they quoted 20203 is an exceptional year, double-digit premium growth, and they talked about a P&C property and casualty combined ratio of 86.5%, which is impressive. Now, for those who aren't aware, the combined ratio is it's a popular metric in the insurance world. It's ultimately the incurred losses plus expenses divided by the premium revenue, the earned premium revenue. You want to see that number below 100%. Below 100 is good, so 86.5%, obviously, well below 100. You look at other companies like Mark Hell, a company that we follow here, they've done a very good job through the years of keeping that combined ratio in pretty good shape. But he bought a good performer in what is obviously a very crucial market in something that

he knows very well, so it makes a lot of sense. Matt, a lot of speculation here because the SEC had granted Buffett a confidentiality exemption in Q4 for their 13F as they were building up this position. Certainly, a lot of investors following Buffett into Chubb. Shares were up 7% this week on the news. What do you see when you look at the business? Yeah, I'm surprised and not surprised because I think one of the betting favorites was Charles Schwab.

I think that's what a lot of investors were talking about. But you're right. For everything Jason said, this makes a ton of sense. And I can understand why Buffett wanted to kind of keep this one under wraps. I mean, it's hard. It's hard for Berkshire to build a meaningful position in anything these days. A $6.5 billion position takes time. And I can see why he wanted to do that because Chubb's trading at a pretty good valuation.

It's like 11 times earnings. It pays a nice dividend that's been growing. And so had that been revealed earlier, I can imagine that, you know, Berkshire Buffett wouldn't have gotten the price that they've gotten in the stock. Price would have creeped up just a little bit. I think people tend to pay attention when Warren Buffett is buying. People also paying attention when Warren Buffett is selling. I think one of the other things I noticed in the 13F was Buffett is a net seller of stocks for the quarter.

Jason, any surprise there for you? That is a little bit of a surprise. I mean, he talks often about being net buyers, right? I mean, that's something we espouse here, trying to accumulate that stuff over time. But, you know, the flip side of that is you're doing it for something, right? Eventually, you get to an age where you want to reap those benefits. And so you've got to sell, right, to be able to reap those benefits. Now, I'm not saying that's exactly what's going on here.

I think what they got fully out of the Paramount position, which was a loser. That happens. But that was a pretty big position. I think they took close to a $2 billion loss on that investment. We know that he trimmed a decent bit of Apple. And I'm starting to kind of wonder if I think that might have been a prudent move. I mean, you start to look at Apple these days and sort of the way they're operating in this AI environment, right? That's the company that you just don't hear a whole heck of a lot from. You're hearing

from Microsoft and Alphabet and chat and, you know, OpenAI and whatnot. And Apple just kind of seems to be sort of on the back burner there right now. So maybe he saw the valuation in Apple and the size of his stake and decided to trim in that position was worth it. You know, I think one of the things that does give people a little bit of pause when they see Buffett selling is there's no shortage of cash when it comes to Berkshire. And so I have to ask the question, Matt. He's a lot. He's a He's not freeing up money to buy something else. He's got the money already. That's what I was just going to say. He's up to $189 billion now in cash and short-term securities. I mean, that's just highest it's ever been. I have to say at this point,

I think Buffett never vocally or verbally makes a market call, right? But I just feel like he's making a little bit of a coral here, almost $200 billion in cash, a net seller of stocks. Maybe he's just not finding a lot of value right now, and that's worth thinking about. So, if investors are following Chubb, following Berkshire into Chub, maybe also put some cash on the side, create some opportunities for yourself to buy some things down the road. Yeah, and maybe Berkshire needs to think about instituting dividend, right? There we go. I mean, with all of that cash, with that awesome portfolio, with that tremendous operating model,

I just, yeah, I keep wondering if we're not going to see that come to fruition here over the course of the next year. I think, yeah, unfortunately, I think it's going to be Greg Abel's call. We'll see. We'll see. That's going to be probably at least a few years now. Hopefully. All right. A big week in the world of AI, new demos out from Alphabet's Google and OpenAI. Jason, I want to start with Google's I-O event because the narrative around this company has generally been missteps and late to the game. And we saw some pretty impressive stuff this week. Yeah, we did. I mean, I think that's very well said, looking at everything that's been going on at AI. And there were these questions as to whether Google's model was being disrupted and were they making the investment? that were needed. There was a great blog post this week from Liz Reed, the head of Google Search, and it really dug into a lot of what Google's doing in search, and particularly with this AI overview's product, which is ultimately just its AI organized results pages. And one of the

concerns in regard to Google and AI and how they were incorporated, this was would it cannibalize their business? It seems like they kind of saw around that corner, and have come up with a way to where they might be able to avoid that. And in a quote from this blog post that I just think is important to read, and she said, quote, with AI overviews, people are visiting a greater diversity of websites for help with more complex questions. And we see that the links included in AI overviews get more clicks than if the page had appeared as a traditional web listing for that query, end quote.

So I think that is a very positive development. They may have come up with a way to essentially enhance their search, make it better with AI without necessarily disrupting or cannibalizing it. One of the things I like about what we're seeing from Google and the developments from Google is they are user-facing. They are immediately brought into these products that people are already familiar with. I think it maybe starts to quell some of those fears about how does this get incorporated into the business in a way that's meaningful. We also had updates from OpenAI, some fresh demos out this week. they are kind of in their own little garden a little bit. They aren't as incorporated into a visible product,

so you have to be a user here. But Jason, one of the things that really jumped out to me was the translation capabilities and just the ability of their product to make sense of things that aren't text, moving beyond simple text. Yeah, and I'm sure it's going to take some time to really nail this down and get it to where it is fail-safe, right?

But I think GPT-40, I watch some of those videos in sort of the video interaction with this personal assistant. I mean, you're now talking about interacting with this personal assistant on your phone, and that assistant being able to recognize the world around you, right? Seeing you and seeing what you're wearing and what you're doing. I mean, this is a big step forward, right? I mean, we've seen with these AI models, they do a very good job of recognizing and processing text. Video is that next leap forward.

It sounds like they're well in their way. It always feels like there are steps to those aha, moments for me, and this felt like a big step forward. I agree. All right. Jason Moser, Matt Argusinger, fellows, we're going to see you guys a little bit later in the show. Up next, we've got one of the giants and groceries talking through growing a retail concept. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Dylan Lewis. Each week with our interviews, we look to borrow the brains of someone that can make us a little bit smarter about the world of business and better investors and shareholders. This week, I caught up with

Whole Foods co-founder and CEO, John Mackey, about his latest book, The Whole Story. Mackie talked me through lessons learned and growing store footprint, and how to evaluate a company's mission and management from the outside. So the whole story is your latest book, but you've written several, and you've often used it as an opportunity to storytell, to share, I think to evangelize a little bit, as you might say yourself. This time, you're reflecting on decades of life and business, and what did you see when he took that step back? You know, that's a really good question. What's interesting about writing a book, particularly a book like where I got to review almost 50 years of my life.

And the act of writing itself is a discovery process, and it's a creative process. But it also, if you're doing sort of a memoir, it reconnects things. And you see things retrospectively that you didn't see at that time and maybe didn't see until you actually started writing the book. I began to see patterns as I was writing, for example, that I hadn't seen before. one of my takeaways was reflecting back on where things kind of took a bad turn for Whole Foods. And back in the 2008 recession, we had a, well, Whole Foods stock dropped 90%. And we were trading it three times our operating cash flow.

So you could have bought our company and paid for it with our own cash in just three years. So needless to say, we were a little worried that we might get taken over. A hostile takeover might come our way. And so we took in some private equity funds from Leonard Green that in the legal agreement, they had to vote with management for a certain period of time. So it would act as protection money. And they did very well because they made like $4 billion in less than three years on that investment. Wow.

So pretty amazing thing. But as we came out of that recession, our stock began to not only recover, but it went up to all-time new highs within just a few years. And it was very heady to watch your, you know, having worried that you were going to be taken over to your stock. I mean, we literally went up from, you know, we were down 90 percent, and we traded on to new highs, got our all-time market capitalization high of about $24 billion. And we went from being radically undervalued to arguably radically overvalued in just a few years. But that was the greatest opportunity the company ever had in our history to lower our prices. the competitors were starting to copy us and catch up, and they were taking more and more

of our products, and they were trying to undercut us in price, and we had, we were, had the, the whole paycheck narrative was out there. And so this, we could have put that narrative to bed then if we had just not been less greedy and less euphoric over our double-digit comps and our continued stock going up, and we just, you know, we felt like we were unbeatable. But if we'd just been a little humbler and had been lowering our prices, our stock wouldn't have gone up so much, so it wouldn't have been, it wouldn't have gotten up to a $24 billion valuation, which arguably was not defensible or sustainable with the current sales and EBITDA that we were producing. And we wouldn't have gone up as much, but we would have been able to lower our prices.

And if we'd done that, we probably would very likely still be an independent company today. As is often the case with great stories. There are setbacks along the way. 2008 is one of them that comes up. But in the early days, you also have the flood in Austin at your first location. We have the benefit now of knowing Whole Foods as this trailblazer, this category-defining idea, this business that has over 500 locations. It was not that, and it's not that when you start the book. It's safer way. It's a single location in Austin. At what point in that story and in that development, do you start to see the opportunity with natural foods blossoming into what it became? I began to see it early on because we could see

that there were other small chains like Whole Foods Market, Mrs. Gooches in Los Angeles, Bread and Circus in Boston, alfalfas in Boulder, Unicorn Village in Florida, that were kind of our peers. We were swapping financial information, and we created something called the Natural Foods Network, which we got together three times a year and shared financial statements and talked about strategies. So we had these sort of colleagues, and I thought, you know what, this is going to grow, this movement's catching on. All the companies were doing well. They were all growing. So that was my first inkling. I just thought of Whole Foods.

We could be this good Texas company. And it wasn't until I took a road trip back in 1996 with my first wife, Mary Kaye. And this road trip, we drove from Austin, we went to L.A. and toured Mrs. Gooch's and other stores there, and Trader Joe's, when they were a very different company, then they turned out to be, too. But we went to Northern California, which is kind of the, really the birth of the counterculture. It had been famous for the Berkeley Co-Ops and the Berkeley Free Speech Movement, and you had Silicon Valley beginning to burst forth, and you had Marin County, and San Francisco is this

very special place, Summer of Love, the hippies, and it was like, but you know what? They didn't have any natural food supermarkets in the Bay Area, although there were tons to natural food stores. That was the first time I realized, oh my God, maybe Whole Foods Market, maybe we can open a store here. we could come to California into the Bay Area, which we thought was a really crazy idea. I mean, it's like, wow, that's a big step going from, you know, just a few stores in Texas all the way out to the Bay Area. Can we do it? And we actually had our team members. We solicited

the votes of our team members. We just said, what state outside of Texas should we go to next? It shouldn't have surprised us. The overwhelming consensus by the team members is that our next state should be Hawaii. Was that market opportunity or was that lifestyle opportunity? I don't think they were thinking in terms of a business opportunity. They're thinking about where they would like to live. And if you open a store in Hawaii, count me down as moving out there. So that was too far a step for us, although we've been very successful in Hawaii ever since we went there.

The only state, we don't have to compete against Trader Joe's because they've never gone to Hawaii. But California was number two on that list. So we went to California next. We went to the Bay Area, Palo Alto, and then Berkeley, then Mill Valley, then San Francisco. And I think now we have about 50 or 60 stores in the Bay Area. It's one of our best overall market areas. And so that enabled us to think, you know what? If we can be successful here, we can be a national company.

And so then we started working on that dream. You get into the growth strategy with Whole Foods and the process of opening new locations, acquiring new locations, and also some of the companies that you mentioned, some of those colleagues slash peer, not quite competitors, wind up becoming part of the Whole Foods' footprint. There's this opportunity and this recognition, I think, that you need to seize this and move quickly. What did you feel like some of the lessons learned were when you were expanding that footprint? Whole Foods ended up being, one lesson was we were the first ones to take venture capital in. We were the first ones to raise serious capital. We were,

first wanted to do an IPO. And our peers were not, they were just thinking small. And we were, Whole Foods was beginning to think larger. And once we did our IPO, then we were a platform and also an exit strategy for the other entrepreneurs. They could sell their companies. They could get liquid without having to sell it to somebody they didn't want to, because we were friends. They could sell it to us. They trusted us to manage their business as well. And they got rich. They got big paydays. they could write off in the sunset and live the rest of their lives, doing whatever they wanted to do. They were free. So that was a win, win, win. But it also gave us platforms. It gave us what we call territory and talent. So we got new territory that we could as a base that we could begin to expand

from. The hardest thing is to get the first base established. Because where are the workers going to come from? Where's the talent going to come from? If you can acquire a platform that already exist. You've already got talent. You've already got some territory. And you can take that and put our operational expertise into it and then grow it from there. So we bought first Wellspring Grocery in North Carolina because they were friends of ours, then Bread and Circus in Boston, then Mrs. Gooch's in L.A., and then we went down into Florida. And we pretty much eventually bought almost everybody that had been connected into the natural food network. So that was a big takeaway, big lesson, that starting a new region was difficult and expensive, and you had to

get, you had to incent people to move, and you still couldn't get that many people. But if you could buy something, it was already there, and combine the intellectual capital together, and you took an attitude of humility, we don't know everything, these people, the information of knowledge they have can enrich the whole rest of the company. So we had this attitude of, this is what we know, what do you know, let's compare notes, let's get best practices. So we were, learning and growing together, rather than, hey, we must be better and smarter than you, right? Because we bought you, you didn't buy us. Instead, we had an attitude of, what can you teach us? What do you see that we're not doing well, that we could do better? And that attitude

really helped Whole Foods market evolve at a quicker pace. You mentioned the venture capitalists, and there's a little bit of a double-edged sort there, helping with some of the growth, but then also inviting people in who maybe have different ideas, different incentives, different timelines for things. What was your experience like navigating that? I had a love-hate relationship with the VCs because I came up with a name that I think catches it pretty well. The venture capitalists were like hitchhikers with credit cards, meaning they got into the Whole Foods car, and as long as we took them to where they wanted to get to, which was either selling the company or doing an IPO, and we did an IPO,

so that they could get a really nice return for their investors, which we delivered, they would help pay for the gas. They'd help us with money to let Whole Foods deliver on the promises that we made to them. However, if we were unable to deliver on those promises, then there's a tendency for venture capitalist to sort of hijack the car, hire a new driver, generally with an MBA from Harvard or Wharton or Stanford, and kind of throw you out on the side of the road, the entrepreneur on the side of the road. So we were lucky because we did get those hitchhikers with credit cards to where they wanted to get to. They never took over the car, and so it had a very happy ending. I have lots of other entrepreneurial friends who got kicked out of the car and thrown on the side of the road. So what I'm talking about is not hyperbole.

It happens all the time. You like to focus on mission and purpose, and it comes up in the book quite a bit. It is a very difficult thing to assess as an outsider for a business. You can really get a feel for as an insider. But we're investors and we're looking at other companies very often. Do you have any tips for really getting to the nut of that? I do. First of all, every company is going to put up some kind of mission statement.

It's just kind of now something you do. One thing you can ask is, where did that mission statement come from? Did it come from a consultant that the company hired to produce a mission statement? Did it come from outside? was it externally sort of created? Or was it something that emerged from within the company itself? The ones that emerged from within the company are really authentic higher purposes. Because in a lot of ways, the entrepreneur is oftentimes driven by a higher purpose,

but it's sort of tacit for them. So many entrepreneurs are very intuitive, driven people, and they don't always communicate and make explicit what their own potential a high purpose or what they think the business is. And so a consultant can come in and kind of help tease that out, that would still be kind of an internal higher purpose because it's just being teased out as opposed to, here's, you know, what I think your higher purpose should be, having talked to a few people. So if the purpose is coming from within and you're making what's been tacit explicit,

it and the entrepreneur aligns with it, then you really have an authentic higher purpose. And I've also found that you can often tell if the higher purpose is frequently don't last past a founder, to be honest. Once you begin to professionalize the management team, the professionals come in and they bring a lot of intelligence and sometimes a lot of business experience, but they don't necessarily bring the passion in. They're, aligns with their career and their resume, their loyalty is more to that necessarily than the business. As you wrap your book, you give us your recipe for your favorite smoothie. Half veggies, spinach, broccoli, bok choy, radishes, half fruit, berries, banana, seasonal fruits,

dates. Any other Mackey favorite recipes you can share? For smoothies or for food in general? Food in general. One of my go-to, easy-to-make food, which is really nutritious, is first you need an instant pot. which is the greatest thing because you've got the pressure cooker on that. So first, you've got to soak your beans. So this is the only preparation. Soak the beans, but you can do a quick soak. Put them to boiling, bring them to boiling for a minute and turn it off,

and then throw out the water after an hour, and then your beans are quick-soaked. Or you can do it overnight, and they'll be even better soaked. So it starts with beans, some bean of your choice. And then lots of root vegetables. I usually, so carrots, sweet potatoes, regular potatoes, other vegetables, bok choy, broccoli, onions, garlic. So it's kind of a stew. It's a bean and vegetable stew. And then you can go sort of Mexican with your seasonings with a little bit of chili pepper in that to get a chili, a little bit chili there.

Or you can go Indian with a little turmeric and garam masala and black mustard seeds. and there are different ways you can go in terms of flavoring it up. And then for me, I'll make up the whole instant pot with that bean stew. And I can make tacos out of that. Once I have that there, I can make tacos. You add cilantro and avocados and tomatoes and salsa. Or you can do, if you're going Indian, you can put a dosa out there. I mean, that source is this foundation food that, or you can just have it as a stew,

which is the easiest thing to do. So, hey, between smoothies and a good bean and vegetable stew, I'm eating well for a few nights of the week, for sure. Listeners, you can get John Mackey's book, The Whole Story, beginning May 21st. In addition to his smoothie recipe, it's also got his reflections on the Amazon acquisition of Whole Foods and details on his next chapter, Love Life, a holistic health and wellness club opening its doors in L.A. this summer.

Coming up after the break, we've got stocks on our 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 four more recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Dylan Lewis, joined again by Matt Argersinger and Jason Moser. We're going to jump right into stocks on our radar this week. 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? All right. Back to T-R-P-R-Price, ticker TROW. I did not know this, but according to the Sovereign Wealth Institute, very

reputable organization. I'm sure. Serious. T-Rowe Price is the ninth largest asset management firm in the world. I bet not many investors know that, including me. So it ended the first quarter with 1.54 trillion in assets under management. That's up, about 200 billion year-year. Of course, all of that was driven by a really strong stock market over the last 12 months, as we know, which drove asset values higher. Tiro did see $8 billion in net client outflows. So those are clients who actively withdrew money out of TRO's funds, but that's very small, and that's roughly half of what the net outflows were a year ago. So what does a big AUM increase like that do for

TRO's business? A lot. So if you look at their net effective rate, which held steady, they had a 13.8% increase in net revenue in the quarter, 22% increase in net operating profits, a lot of operating leverage in this business, generated 535 million. in free cash flow, paid out 287 million dividends, which I love, and made $83 million in share or purchases. And so I look at this business. Assets are growing. Performance, by the way, long-term performance of all their funds and strategies, very strong.

The stock trades for about 13 times forward earnings, pays a 4.3% dividend. I think Dan likes dividends, too. So I like what I'm seeing now with T-R-R-O. Dan, interested at all in that dividend and shares of T-R-O-W? Yeah, sure. but I've started to notice something, Dylan. I've started to notice a little bit about Maddie's investing style, and it seems to be real estate and companies that already have a large amount of money on hand.

Hey, what's not the like about that? I don't think he's trying to make it too hard for him. That's right. There are no style points. Take the easy wins where you can get them. Jason, what's on your radar this week? Yeah, taking a closer look at Shopify. Ticker is S-H-O-P, and Shopify is one of the leaders in the e-commerce space,

with its ecosystem of tools and services that help businesses of all sizes with their e-commerce presence. And the company recently reported quarterly results, and it was a great quarter. I mean, revenue $1.9 billion was up 29% after they adjusted for the sale of the logistics business. Some other KPI's key performance indicators that look good. Gross merchandise volume up 23%, gross payments volume up 31.6%. And subscription solutions are up 34%. So, the business is doing very well. The kicker here was guidance, right?

They guided for revenue growth in the coming quarter, more in the mid-teens. And for a company that's just continuing to chalk up these 25-30 percent rates, that's a problem. That's why the stock sold off. But I can't help wonder if maybe there's an opportunity here. Dan, a question or perhaps a comment on Shopify? Shopify is a Canadian company headquartered in Ottawa, Canada. And in a couple of weeks, I'm going to go to Ottawa, Canada for the first time.

so I'm not going to go to the headquarters, but I'm just, I guess, excited to go to Canada. You'll be near Shopify, I guess, Dan, I will be in existence near where Shopify also exists. Dan, which one's going on your watch list this week? Let's go Canada. Oh, Canada, Shopify. All right, that is going to do it for this week. Smoutlyful Money Radio Show. The show is mixed by Dan Boyd. I'm Dylan Lewis.

Thanks for listening. We'll see you next time.