Motley Fool Money - Dry January, Big Banks, and Trouble at Disney HQ

Episode Date: January 13, 2023

Earnings season officially kicked off! (0:21) Jason Moser and Ron Gross discuss: - Inflation falling for the 6th month in a row - The common view Jamie Dimon and Brian Moynihan have on the U.S. economy - Disney’s fight with activist investor Nelson Peltz - Starbucks and News Corp becoming the latest companies announcing a return to offices - The latest from Delta Air Lines and Outset Medical (19:11) David Henkes, senior principal at Technomic, shares how the restaurant industry is “recession resistant”, the rise of drive-through, and the impact of Dry January on restaurants.   (36:15) Ron and Jason share three investments on their radar: Nasdaq Cybersecurity ETF, Industrial Select Sector Fund, and S&P Global Infrastructure ETF. Motley Fool premium members, click here to link your Motley Fool membership to a Spotify account and begin listening to this exclusive new podcast! If you're not a member, you can get a preview of the show and learn how to get access here on Spotify! Stocks discussed: JPM, BAC, WFC, CITI, DIS, NKE, SBUX, NWS, NWSA, DAL, AAL, OM, MCD, CMG, SAM, CIBR, XLI, GII Host: Chris Hill Guests: Ron Gross, Jason Moser, David Henkes Engineer: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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If you're 45 or older and at average risk, ask your health care provider about the Coligard test. Coligard is available by prescription only. Learn more or request a prescription today at colagard.com slash screen. What kind of year are the big bank CEOs preparing for? And what kind of effect is dry January having on restaurants? Motley Fool Money starts now. Everybody needs money.

That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Full Money Radio Show. I'm Chris Hill joining me, Motleyful Senior Analyst, Jason Moser, and Ron Gross. Good to see you, as always, gentlemen. How are you doing, Chris? We've got the latest news from Wall Street. We've got an update on the state of food and beverage with industry expert David Hankis. And as always, we've got a couple of stocks on our radar,

but we begin with the big macro. The latest inflation data shows that consumer prices fell 0.1% in December. That is not a big number, but it's the six month in a row that CPI has fallen. Putting U.S. inflation at its lowest point in more than a year, Ron. Yeah, I actually like these numbers, at least. in terms of what we're trying to accomplish here, getting closer to the Fed's target of 2%, we're still quite a ways there. But these numbers are coming down. This is mostly related to a sharp drop in gasoline prices. But being that these numbers are from December, so they're current, but they're still two weeks old and they're backward looking. I think inflation probably has

moderated even more than these numbers indicate. And I will be very curious to see what the next report looks like. So far, the Fed has raised interest rates by four and a quarter percentage points. Rates are likely to exceed 5 percent before the Fed could pause, maybe even approaching 6 percent. The job market remains strong. A bit of weakness there, while certainly that would be painful for some, would probably be helpful to the bigger picture, especially if wages increases moderate. So soon, I think the conversation will pivot away from rate hikes and more towards the consequences of our recession, which maybe we can touch on a little bit later when we talk about what we're hearing from the big banks.

Well, let's get to the big banks because earnings season officially kicked off Friday with some of the biggest banks reporting. J.P. Morgan Chase, Bank of America, Wells, Fargo, and City all out with fourth quarter results. Jason, we don't have the time and, frankly, the interest to go through each one of these with a fine-tooth comb. But you tell me, what caught your attention? Well, you know, Chris, I mean, back in the day, This would be an industry focus month-long marathon, right? But we'll settle for a Motley full money minute. Yeah, I mean, I think, listen, the trend continues.

Banks are continuing to take a bit of a conservative approach, right? They're preparing for a potential downturn. They're boosting their lost reserves to account for that. Definitely seeing some benefits from the rising rates with nice tailwinds to net interest income. Looking at the banks specifically, you've got JPMorgan revenue was up 18% from a year ago. They did build that net reserve, right? That credit reserve, they built up $1.4 billion in that reserve there. So they're preparing, I think, for a potential storm.

And Jamie Diamond has said, I mean, their base case is a mild recession, like Ron was saying. I mean, you can talk about the recession sort of conditions and thoughts there, but it seems the consensus is with most of these banks is they're preparing for a mild recession at the very best, Right? In thinking it could get worse, but I mean, on the good side, net interest income was up $20.3 billion for JP Morgan. It was up 48% from a year ago. They do continue to see boosts in trading income for fixed income instruments as rates move, but that's not enough to offset the challenges they're seeing in investment banking revenue in the wake of just IPO markets, which is more or less ceased in dealmaking in general.

general. Again, central cases are modeling for a mild recession. Wells Fargo, much the same. Revenue was actually down slightly from a year ago. Earnings for share cut in half, but that was thanks to a 70 cent charge, 70 cent per share charge for litigation and regulatory issues, which unfortunately for Wells, that just seems to be a quarterly narrative. I was just going to say, wow, it's not non-recurring. It seems to be a quarterly narrative. They are getting out of the woods, but it is something we're going to continue to talk about. I think for the foreseeable future, unfortunately, they added almost $1 billion to their loan loss reserves for the year.

Their net interest income was up 45% from a year ago. And then looking at Bank of America, revenue up 11%. They added 1.1, the provision for their credit losses of $1.1 billion that was up. Net interest income again, benefit there, 29% growth from a year ago. So they're benefiting from higher rates. They are preparing for what looks like may be a rainy day around the corner. And I suspect we're going to hear more of the same as the year goes on. Yeah, Ron, when you have Jamie Diamond and Brian Moynihan both talking in similar terms,

in terms of a mild recession, I think it's worth paying attention to. I want to get your thoughts though. Earlier in the week, Wells Fargo announced that they are stepping back from the home mortgage business, which to me is striking because they used to be the leader. in this space. As recently as 2019, the top lender in the country. So, yeah, a bit of a surprise. Obviously, they've had their challenges. This is the most, I think, strategic shift that Charlie Sharf, CEO since 2019, has put in place for sure. They're going to just focus on existing customers and not go after new U.S. mortgages. And that's because of regulatory pressure,

the impact of higher interest rates. So they're going to actually start to look a little bit of to look a little bit more like Bank of America and JPMorgan Chase now, which will be interesting to see going forward how their earnings reports, certainly their top and their bottom lines are impacted by this relatively big decision by Mr. Scharf. The Walt Disney company has a fight on its hands and it's not just from competitors. Triand Fund Management led by famed activist investor Nelson Peltz has taken a small stake in Disney shares and wants a seat on the board. The company is urging shareholders to reject any proposal from Peltz.

And this week, Disney announced that Nike chairman, Mark Parker, will become the new chairman of Disney's board. Ron, once upon a time you yourself were an activist investor. What's the most interesting part of this story to you? You know, the first thing that hit me is that it's hard to take on a huge company like Disney with only a small ownership stake, and I know that certainly from experience. Peltz has successfully gone after big companies before. DuPont, Mondalese, Procter & Gamble, the list goes on. So he knows how to do this. He's no stranger to this. He's been making

a strong argument, quite frankly. Disney has stumbled. The stocks near its eight-year low. He points out a really kind of non-existent CEO succession plan, high executive compensation, costs are way too high. And I think he has some fair points. You know, the, the The Fox acquisition back in 2019 added a loaded debt to the balance sheet. The dividend has been suspended for quite some time now from during the pandemic and it continues to be suspended today. Costs at Disney Plus are very high. So there's lots of things this company needs to turn around and get right.

And that's what makes you ripe for an activist investor to come in. Now, there's two big personalities here, Peltz and Iger and they're going to butt heads until somebody either gives in or Peltz takes it all the way to a proxy fight, which he intends to pursue. Usually these things are settled before that. They're taking some places, such as you said, putting a new chairman in place. That's an interesting decision to me. It's rough to be the chairman of Disney and Nike at the same time. I'm not sure I love that decision. But it will be interesting to see how this plays out, because whether Peltz forces it or not, Disney definitely has some restructuring to do.

I'm a Nike shareholder, and I'm positive. I don't love this decision. Disney was part of another corporate story this week. The CEOs of Disney, Starbucks, and News Corp became the latest to announce that employees must return to their offices. Jason, these are three very different businesses, but the one thing all of these announcements had in common was the use of the word collaboration. Yeah.

Yeah, I mean, I feel like we've talked about this a lot. I feel like we've lived through this and we're continuing to live through this. It's just this push and pull. Remote work, hybrid work, it has its virtues. Collaboration ain't one of them. I can tell you that. I mean, it is very difficult to capture that lightning in a bottle, so to speak, right, when everybody is siloed and separated. And so I don't think it's any accident that more employers are calling folks back to the

office every day. I mean, Disney and Starbucks are not isolated in this, right? I mean, we're seeing more and more companies doing this every day. Businesses, period, they're falling short and to ignore the biggest, single, biggest change that has been made to these businesses to all businesses over the last three years in fully distributing their workforce is just naive, I think. I mean, there are a lot of reasons why businesses could be falling short, right? I mean, it's a very difficult time, I think, for everyone.

But you've got to look at everything and you have to look at the biggest changes that have been made. There's no question that the way that we work, right? This has been one of, if not the biggest change that we've witnessed over the last several years. And so I think for CEOs, they're starting to take a look at this and saying, hey, you know what? Let's at least try to start eliminating what could be going wrong. Let's all get back together.

We need all hands on deck here. And we need to sort of reestablish the base of what made these businesses to begin with. I mean, certainly some businesses will be able to adjust to this sort of new paradigm better than others. But I think there are a lot of businesses out there. We're really, honestly, collaboration is just the lifeblood of what they do. Certainly Disney falls in that category, but I think we're seeing a lot of these businesses really do fall in that category.

So it's not surprising to me to see this. And I know a lot of folks say, well, you know, these are just. These are arbitrary decisions and these are just CEOs who are on a power trip and look into micromanage and yada, yada, yada. Well, they better have some data to back it up. I don't know about you, but Chris, the shortfall of the business is the data, right? The fact that these businesses are suffering, I think is legitimate data for them to at least start saying, hey, let's try getting everybody back together and see if we can't figure out exactly what's going wrong here. One thing interesting to me is that they're calling there and plays back three or maybe four days

out of the week, not full time. And I'm wondering, is that because they're worried about an all-out revolt by the employee base? Or do CEOs actually believe that hybrid is the new model going forward? And then that can make sense. I think we'll have to look back five years from now or even 10 to answer that question. Yeah, I think that's a good point. I think generally speaking, I think most of us agree. I think hybrid is the way of the future, right? I think we all agree. That works well for everyone. It's just trying to figure out that balance. And by the same token, I would not be surprised.

I mean, job cuts have been a very big theme here of 2022 and 2023. It wouldn't shock me. A lot of these CEOs are saying, hey, listen, you got to get back to the office. We're going to force your hand here. And if they happen to witness a little organic attrition because of that, well, then that's all the better because they're looking to right size their businesses anyway. The biggest restaurant chain in America is up for sale. More on that after the break.

So stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Ron Gross. If you're enjoying this show, then let me tell you about the other new show that we launched this week. It's called Stock Advisor Roundtable. It is our first ever member exclusive podcast. We partnered up with our friends at Spotify to bring this show to members of our Stock Advisor service,

along with Epic Bundle and the Motley Fool's Advanced Investing Services. So if you're listening to us right now on the radio, just go to Spotify and simply search for Stock Advisor Roundtable. And if you're listening on a podcast app, check the description of this episode for how to link your Motley Fool premium account to a Spotify account so you can start listening. Delta Airlines wrapped up its fiscal year in style. Fourth quarter profits and revenue came in higher than expected, but guidance for the first quarter sent shares of Delta a little lower on Friday. Still, Ron, it's been a good January for Delta shareholders so far. Yeah, but you nailed what's going on here with the stock on Friday.

The quarter looked fine. Operating revenue up 8%, 7% domestically, up 5% internationally. Domestic corporate sales, which everyone has an eye on, have recovered about 80% from 2019 levels. So good, but not back to where we were pre-pandemic. Operating margins are still weak, 11.6% versus 12.5%. in 2019's fourth quarter. Most of these comparisons are to 2019 because it evens out. It normalizes these comparisons. And earnings were down 13 percent from that 2019 level as well. But the company was able to pay down almost $5 billion of debt. But as you say, the stock reacted mostly

to first quarter profits forecast being below analyst estimates. They did reiterate full year. fuel and labor costs are the primary culprit for that week forecast. 34% pay hike to pilots is on the table. They've got to hire people to kind of service the demand that they're seeing. So we'll see what the net rest of the next couple quarters look like. American Airlines, interestingly, just lifted its revenue profit, revenue and profit outlook for the December quarter, and they'll report fully on that later this month. Outside Medical updated their guns for the fourth quarter and the full fiscal year.

You know, normally, Jason, you get these kind of pre-announcements. It's not great news, but shares of outside medical up a bit on this one. Yeah, I think you, I think we all agree. It feels like preannounces are never really a good thing. In this case, it feels like it was ultimately good news. Their last earnings call was November 8th, 2022, so Q4 results won't be out actually for another month. But this, I think, gives us at least an idea of how management is feeling after what was a, I think, a volatile, best way to describe it, a volatile 2022.

A reminder, you know, outset, they have the first hemodialysis system on the market with the FDA clearance for two-way wireless data transmission. So their tableau system is a trailblazer, but this is a very young business still kind of finding its way in getting established. But management ultimately pegs their addressable market there, the U.S. addressable market in the acute space at $2.5 billion in the at home market at $8.9 billion. So there is a lot of opportunity here on the table. And so expectations, they see the fourth quarter in full year 2022 coming in a little bit

better than they did before, right? I mean, they're seeing revenue for 2022 of around $115 million up 12% from a year ago. That range was in, that guidance was in a range of 111 to 113 million previously. So not a big boost, but a little bit, but they continue to see that installed base grow. Their installed base is up 54% from a year ago. They've crossed over 1 million treatments now. So this is a company that I think continues to do the right things. They were able to kind of get through that FDA hold when they made some updates to their

system earlier in 2022. Very optimistic for what the future holds for this business, but it's still very clearly a young business still finding its way towards that path of profitability. No restaurant chain has more locations in the U.S. than Subway. This week, the Wall Street Journal reported that Subway has hired advisors to explore a sale of the privately held company, and early indications are the deal could be worth $10 billion. Ron, can I interest you in a really big sandwich shop? Maybe.

Maybe. I've had a few turkey sandwiches in some of the market. subway in my life. It's an interesting company because they're private. They really peaked in 2012. They stumbled along the way in the years after that. A new CEO came in 2019, closed locations, restructured the company, focused on the menu and the food quality. Certainly, we see the Eat Fresh advertising with lots of famous people. And I think those have probably been successful. Indications are that the company does around $9 to $10 billion in total revenue, Not the revenue they collect from their franchises, but in total.

So maybe we can glean some of that and take that and look at valuation. Duncan, similar size, acquired for $11 billion in 2020. Domino's similar levels of total revenue. They have a market capital of $11.5 billion. Restaurant brands bought Firehouse Subs for $1 billion, Subways 8 and a half times that large. So $10 billion might very well be in the ballpark. So Domino's is a better comp than McDonald's.

because on a restaurant count level, they're closer to McDonald's. For sure, McDonald's is by far the leader in the space. And you have to make sure you look at franchise businesses versus like Chipotle if you're going to start looking at valuation and comparables. Sandwiches are beautiful. Sandwiches are fine. I like sandwiches. I eat them all the time. I eat them for my supper and I eat them for my lunch.

If I had 100 sandwiches, I eat them all at once. All right, Jason Moza, Ron, Gross, guys. We will see you a little bit later in the show. But up next, what effect is dry January having on restaurants? The answer to that question and a lot more from industry expert David Hankis. It's right after the break. So stay right here. You're listening to Motley Fool Money.

I eat them for my supper and I eat them for my lunch. If I had 100 sandwiches, I eat them all of once. Welcome back to Motley Cool Money. I'm Chris Hill. Few industries have undergone as many changes over the past few years like restaurants have. to talk through the state of the industry, food, beverage, and more is David Henkis. He is a senior principal at Technomic. He's one of the top experts in the industry, and he joins me now from Chicago. David, thanks for being here.

Thanks for having me, Chris. It's nice to talk to you again. It seems like the general consensus at the moment in terms of the overall U.S. economy is that, and this is a technical term, it's going to be kind of a meh year, just in terms of the economy, potential for recession, whether or not we are even in one at the moment, and of course, the stock market performance as well. In terms of the restaurant industry, what are you expecting for this year? I think when you look at restaurants, the great news about anything within the food industry is that we are recession-resistant. We're not recession-proof by any stretch, but we're certainly recession-resistant. And so as you look at the full calendar year 2022 coming out of it, the

restaurant industry has really largely and in most segments fully recovered from the challenges that we saw in 2020. And so growth was up and we're actually in the process of revising and finalizing some of our numbers for last year was up about 10 or 11 percent, probably going to be a little closer to 11 percent from a consumer spending perspective. So consumers continue to spend in restaurants, continue to want that out of home experience. And I think as we look ahead to 2023, we're still relatively optimistic. There's no question that things are starting to slow.

Traffic is starting to slow. I think when you look at the numbers and the growth in consumer spending, a lot of that is masked by inflation. Now, the inflation rate just came out today, Friday, and it was up for the year right now, year over year, a little over 8%. And so when you look at menu, price inflation, there's no question that that's driving a lot of the consumer spending. And that'll probably continue into next year, into this year, 2023.

We're actually expecting right now probably about a six and a half percent growth in consumer spending again in 2023. Now, inflation is going to drive a lot of that real growth. If you strip out inflation, we'll probably be flat, maybe up, you know, a little bit. So there's no question that as the, as the industry, industry has recovered. We've started to plateau. The growth has started to slow. But, you know, even as challenges in the economy are starting to rear and have been rearing, we're still expecting to see some growth next year and it should still be a positive year in terms of restaurant sales. Now, it doesn't mean that there's not challenges and it's not, in my opinion, probably as hard,

if not harder than ever to run a restaurant in today's environment. But the top line numbers, least look pretty healthy from an overall restaurant perspective. Well, and part of that challenge has to be the way that consumer habits have changed due to the pandemic and possibly in some cases changed, if not permanently, certainly for the foreseeable future. The Washington Post had a story recently. You were one of the people quoted it. And one of the takeaways from that story in terms of the way the pandemic has changed the

the way we as consumers interact with restaurants is drive-through is on the rise and dine-in is kind of on the decline, isn't it? Yeah, I think when you look at this off-premise, and so we classify anything off-premise as being drive-through, take-out, delivery, that, you know, rightly so during the pandemic into 2021 was, saw triple-digit growth as, you know, certainly in 2020 was the only way people could really get food in a lot of cases. And so that, while that growth is also slowed, it's not necessarily going down, right? It's not reverting back to pre-pandemic levels. And so when you look at how consumers are using, especially the limited service side of the

business, those convenience options are critical. And so we're seeing players that never would have had drive-thrus in the past, the Chapoitte lanes, shake shack, all of these sort of higher-end, fast casual restaurants that are investing heavily in these convenience options to facilitate off-premise orders. And so whether it's for the consumer, whether it's for the delivery driver, whatever, at the same time, this dichotomy is really becoming much more stark where while consumers crave that convenience, as they've come out of the pandemic, this notion of getting back to an experience, a social event, going out with family, friends, certainly a lot of what drove the the growth over the last two years has been this release of that pent-up demand.

And that's still there. And that's really the other way that restaurants are competing now is on that experience, the unique, you know, and whether it's a beverage program, whether it's food, whether it's the service, it's things that you can't get at home. And so even as convenience becomes one of the biggest drivers for growth, the other end of that barbell is the experience. And unfortunately, there's not a lot in between. That's really the two things that are that consumers crave and that are going to be driving the business.

And so on the limited service side and even for some full service restaurants, investing in those off-premise options, coupled with, you know, how do we as restaurant tours make that in dining when people do decide to dine in? How do we make that the best experience that it can possibly be? And so, you know, those are the challenges. And especially with, you know, labor and cost increases and all of that, doing both of those really well is hard to do. And so you've really got to pick your lane. and figure out what you do well. You mentioned the investments that restaurants make.

I think back, even before the pandemic, a restaurant chain like McDonald's was starting to invest in the self-serve kiosk that they were putting into some of their locations as they were looking to update them, refresh them, that sort of thing. I have to imagine that if you're gonna commit that kind of investment,

a restaurant chain has to have a pretty high degree confidence, don't they? That, again, that some of the changes that we've seen in behavior are going to stick around for a while. I think so. There's a lot of restaurant chains that are built, that are betting heavily on this convenience option, right? And so whether it's the whole new footprint and reducing seating capacity to focus on, you know, two or three or even four drive-through lanes, there's big shifts in how restaurants are investing. The technology piece is also interesting. And we've been getting a lot of questions lately about automation within restaurants. And there's no question that as the labor situation remains challenging, there's a lot of discussion about

how can we automate or reduce headcount. And the unfortunate part about it is, I don't think we can. I think automation is continuing. And I think we're going to continue to see experimentation here. But we, the hospitality and restaurant business, is at its heart, a very labor-intensive business. And so while you can maybe automate certain tasks away, some of the unpleasant tasks, whether it's cleaning or, you know, the cashier or whatnot, you know, the McDonald's CEO himself has said that they don't necessarily see an ROI and all of this investment that they've made in the different technologies, or at least the automation. And so the future for technology is all about payment systems. It's about convenience. It's

about ease of, you know, sort of facilitating the orders and especially that off-premise experience. But, you know, this idea of automating away labor out of a restaurant is, in my opinion, not going to happen anytime soon, if ever. And so, you know, those investments are, you know, they're going to continue, but it's, you know, it's still a very labor-intensive industry. It's pretty stark to hear the CEO of one of the biggest restaurant chains in the world basically say, yeah, this isn't paying off. So we'll continue to watch that.

And I do want to get to the beverage landscape and the beer industry, but I do have to ask you about canned water. And I want to be very specific for the listeners. I'm not talking about seltzer or sparkling water. I'm talking about still water in a can because despite, you know, What we saw from the stock market in 2022, liquid death managed to raise $70 million in its latest round of venture funding last fall. At the time, that put liquid debt's valuation at $700 million. I see it.

Anytime I go to the grocery store, is canned water a trend that you think has legs? Or is this just a brand that happened to catch lightning in a bottle? You know, it's interesting. I mean, it really shows the value of marketing and of, you know, what a unique brand name that stands out in the marketplace can do for a company. And so short answer is yes. I mean, packaged water in general, it remains a growth area where we've otherwise seen growth is more in the flavor, the sparkling end of waters. And, you know, it's it's so hard to predict how these things will perform in the future. I mean, I mean, I think they've certainly got a brand hook that has worked for them. I think at some point, you'll probably see them expand into other types of waters just because every other major packaged water company has a whole portfolio of broader flavors and sparkling and still. And so at some point, and I don't have any inside information, but I got to suspect that

the lightning that they've captured in 2022, at some point, they're going to have to innovate around the same way that some of the other bottled or packaged water players are doing. Well, let's move over to alcohol then, because the trend that we've seen in the beer industry over the last five to ten years is some of the biggest beer producers in America, really building out that non-beer portfolio in terms of hard, seltzers, canned cocktails, that sort of thing. What does the current landscape look like right now? in terms of beer and those other properties.

Yeah, and keep in mind, we focus a little bit more in the restaurant side of things. And so a lot of those, a lot of those sales go into at home sales, right? I mean, when you look at restaurant and food service sales, while we've certainly seen tremendous growth in those categories, it's off of a very small base. And so at least within the away from home business, it's still relatively small.

but listen, it's one of those things where a little bit of success breeds a lot of imitation. And so, you know, we see a lot of companies stampeding into it. The challenge is that, you know, this whole broader ready to drink business is, is really growing. And I think, you know, rather than the seltzers, you know, and you've seen what Sam Adams, they had some challenges with their seltzer program over the last couple of years and really overestimating, you know, what the opportunities were there. I think, you know, where we're now seeing a lot more growth is in the ready to drink cocktails. Those continue to grow again within restaurants and the broader away from home business. It's relatively small. But during the

pandemic, those things really shine because takeout programs and take out beverage programs were, again, a lot of the only ways that restaurants could sell their alcohol. And so they really shifted. And a lot of states started allowing delivery and takeout of beverage alcohol. And so these ready to drink items really exploded in popularity for restaurants. Now, as people have started to return to dine in, again, like a lot of things that really popped during the pandemic because people didn't have any other choice, it's starting to shift back the other way now.

And so draft beer and things like that are starting to come back on. But listen, I mean, the entire beverage alcohol category is still down relative to where we were pre-pandemic. And so while it's seen some tremendous growth in certain categories, particularly within spirits, are doing really well. As a category, beverage alcohol is still below pre-pandemic levels. And a lot of that is because full-service restaurants are still, you know, trying to catch up to where they were. Bars are still down relative to where we were. Hotels, which is a big segment for beverage alcohol, are still down relative to pre-pandemic. And so the growth numbers have been pretty impressive, but it's also you've got to compare it to pre-pandemic.

And in a lot of those instances, we're still below where we were in 2019. Depending on what source of information you decide to believe, the dry January movement involved, anywhere from a few million people to tens of millions of people, regardless of how many people are actually doing dry January, what sort of impact does that have on the restaurant industry? Because I have noticed this month restaurants doing promotions for very expensive, not cocktails, but mocktails. Yeah. Well, listen, you know, beverage alcohol is by far, that's a lot of, you know, that's a lot of

the, you know, with the exception, maybe some specialty items, but is the profit driver for the menu for most restaurants. And so I guess the good news about dry January is that it's one of the slowest times of the restaurant industry. And so the impact is a little bit more muted than if it were dry July as an example, right? And I think at the same time, what we've seen is growing interest, not just in January, but year round for consumers, and especially younger consumers, millennials, Gen Z, for non-alcoholic options. And so this mocktail program, specialty non-alcoholic drinks have been exploding on menus. And so those from a margin perspective, and you're right, they're, I mean, they're charging almost as much. And in some cases,

as much as they are for cocktails with, you know, high in tequila or some of the other spirits brands in it. And so the margin on those is still pretty good. So I think the economic impact of dry January is probably more muted than you might think it is. I mean, you know, restaurants are promoting the other higher margin options that they can during January. But we've seen, you know, I guess a couple things. We've seen the participation drop. I think it was down three or four percentage points, even versus last year. And we were also seeing the number of people that claim that they are quote unquote

drinkers from a gallop ball drop several percentage points. And so beverage alcohol in general is. is being consumed by fewer people overall. And I think that's part of the challenge that restaurants are having even right now as they try to grow. I mean, beverage alcohol programs are such an important part of their margin.

And they're trying to figure out new and better in different ways to grow. And part of that is expanding that non-alcohol portion of it to appeal to those people that are non-drinkers. So, you know, I think restaurants have bigger issues right now than dry January. It's just another one to throw on the pile. But, you know, I wouldn't put it in one of their top five, you know, issues that they're facing right now.

David Hank has always great talking to you. Thanks so much for being here. Great. Thanks, Chris, for your time. Appreciate it. Coming up after the break, Ron Gross and Jason Moser return. They've got a couple of investment ideas you might want to add to your watch list. This is 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 Ron Gross and Jason Moser. Time for the stocks on our radar. Our man behind the glass, Rick Engdell is going to hit you with a question. Jason, Moser, you're up first. What are you looking at this week? Yeah, a little bit of a different take here this week. I'm actually looking at an ETF and I'll explain why here. It's the NASDA CTA Cybersecurity Index. The ticker is C-I-B-R.

And as a reminder, exchange-traded funds, that's just a basket of stocks. They trade on the open market, very similar to a mutual fund. But it's just unlike mutual funds, those E-T-F prices move throughout the day, like stock prices do. They just traditionally offer better expense ratios than mutual funds.

But C-I-B-R, it's built to follow the performance of cybersecurity companies, shocker. One thing I like about the ZTF, though, 37 holdings in the company. It has a lot of companies that we really like here in our universe. I'm talking about companies like Cloudflare, CrowdStrike, Z-scale, Palo Alto, even Booz Allen Hamilton's in there, Chris. And so for me, you know, I've always said on the show, cybersecurity is just a very difficult market to fully understand for a dummy like me, right? I know that I need it. I just don't know what's best. And it feels like these challenges are always

changing and evolving. So it feels like with cybersecurity, an ETF could be the way to go. And the NASDA CTA cybersecurity index definitely stands out. Rick, question about the NASDA CTA cybersecurity index? Jason, did you just have a really busy week and you couldn't take a stock? No, no, no, no, no. I really do believe in this. Expense ratio of 0.6 percent. I mean, that is just a strong profile there for a company that gives you instant exposure. I really do think this could be a way to tackle the cybersecurity opportunity. Ron Gross, what are you looking at?

This is funny because I have two ETFs for you, right? Oh my goodness. This was not, we didn't, we didn't think of this. Industrial Select Spider Fund XLI gives you exposure to infrastructure and industrial companies, Caterpillar Deer, Raytheon companies like that. And then the Spider SMP Global Infrastructure, ETF, GII, gives you exposure to infrastructure and energy, Duke Energy, Nextera Energy, Sucynexera Energy, Sucy, Sucynexia, and energy, such. Southern Company. I think they will serve us all well in 2023. Rick, question about infrastructure

ETFs? Ron, did you just have a busy week and you couldn't pick a stock? Yes, I did, Rick. What do you want to add to your watch list, Rick? I don't know. I'm going to go find a stock on my own, I think. ETF Week here on Motley Full Money. I love it. Jason Moser, Ron Gross. Guys, thanks so much for being here. Thanks, Chris. That's going to do it for this week's Motley Full Money. radio show. The show is mixed by Rick Engdahl. I'm Chris Hill. Thanks for listening. We'll see you next time.