Motley Fool Money - Making Sense of Stock Drops

Episode Date: February 19, 2022

History doesn’t repeat, but it often rhymes. We're going back in time to make sense of past “stock drops” and pull out the lessons that investors can use today, including: - What to look for from company executives as they respond to crises - Questions to help decide if companies are going through structural or cosmetic problems - How to revisit an investment thesis Stocks: META, LULU, ZM, NFLX, GE, CMG, PTON Host: Ricky Mulvey Guest: Asit Sharma Engineers: Dan Boyd, Rick Engdahl Special thanks to Steve Broido for voicing “Amazing Moments in Market Volatility!” Learn more about your ad choices. Visit megaphone.fm/adchoices

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which makes it so much easier to stay on track. And you can get unlimited expert help at no extra cost, even on nights and weekends during tax season. Visit turbotax.com to get matched with an expert today, only available with TurboTax full service experts. That is the most expensive phone in the world, and it doesn't appeal to business customers because it doesn't have a keyboard, which makes it not a very good email machine. Now, it may sell very well or not, I, you know. I'm Chris Hill, and that was Steve Bomber, back when he was the CEO of Microsoft. He was sharing his not very high opinion of a new device that had come on the market, the iPhone. Turns out, yeah, it actually sold very well.

Today on Motley Fool Money, we're going back in time to make sense of past stock drops. Because when a stock drops, a business could be going through structural problems or just cosmetic problems. Motleyful's senior analyst, Asset Sharma, is going to discuss what to look for in company executives as they respond to crises and share some ways that history may be rhyming during this current bout of volatility. With more, here's producer Ricky Mulvey. You know you're supposed to buy low, sell high. That's much harder to do in practice. Right now, we're seeing one of the most emotional markets in history, maybe, or for you as an investor, it might be. Well, today we're going to look back at some previous volatility, some previous stock drops that can hopefully give us some sense of what's going on today.

Joining me now, Asset Sharma, senior analyst, any contributing learner for the Motley Fool, Osset's so happy to talk to you about this, excited to talk history of past stock drops and hopefully get a little bit more sense of what's going on right now. Yeah, Ricky, the same. Although, I tell you what, you've blown me away. I didn't know that investing is emotional. You didn't. Just kidding.

You thought that it was, you thought we could go in as robots, do some high-frequency trades, and get on out. I thought, turns out it's more complicating. A little bit. And, you know, I think one of the things that's so hard is people think, all right, I'm going to get out and then come back when the dust settles. But the sort of the problem with that philosophy is you never really know when there is an all clear signal in the market. I thought downtown Josh Brown had a good blog post about this actually in 2020, where he was writing about how on March 9th in 2009, that was actually when the stock market returned going up.

And it really didn't give any sign that that was the case. He said, quote, the economic headlines were not improving, but there it was. And by June 1st, less than three months later, the stock market had climbed 41% from that March low. And even with that having happened, the majority of participants still weren't clear that the dust had fully settled. End quote. And I really like that. It's about the broad market, but I think the same can be true about a lot of these stocks that go through a lot of ups and downs. Yeah, I agree.

You know, Ricky, the market itself is this weird beast because it is something that's driven by macro events and economic forecast. It is driven by business performance. So how are the companies doing that you're investing in? But it's also driven by gut. And that's the gut of both institutional players and retail investors. So nobody knows when the dust is settling in a time of turmoil, because none of us really know where we're settled during that. It's sort of this long communal exercise. You can only truly see bottoms in hindsight. So we're going to look back at some of, maybe not bottoms, but drops at least. You know, I think as an investor for me, one of the things that's hard is I know I want to buy

low and sell high, but just because you're buying low doesn't mean you bought at the bottom. So you could buy a stock like meta platforms after it dropped just a little bit, and then, oh, shoot, it drops another 30%. And the mental fallacy I'm getting over right now is just because I bought a stock that maybe was down a little bit, me buying that stock does not constitute the turnaround point for it going back up again. I wish it would be that way. I do too, but that's the thing that's so hard where I'm like, okay, I saw that the stock was going lower. Now I'm in. Okay, now we're ready for the good times. And that's just like, that's not the case. And it's not reasonable to think that as an investor.

I've been in that state many times where I've made the decision to buy. And I'm really thinking a lot about what's going to happen next. I feel like I've pegged where I've pegged where I, I want to buy the stock. I like the price, only to see that my interpretation isn't the market's interpretation of where that stock is going to start rising. Now, if we pin the idea of buy, low, sell high on a single event, we decrease our chances for success in some ways. I mean, if we're measuring the short term, right? I really like both the Gardner brothers, their approaches to this. Tom Gardner, of course, is a big fan of the dollar cost averaging. I think he tweeted this last night, how much he likes this strategy. So,

you're buying over time in multiple steps. Sometimes you are buying higher than the last time you bought. Sometimes you're buying lower. It works out in the end. And I love David Gardner's approach, which is sort of counterintuitive. But if you've done the homework to identify a great company, then you keep buying on the way up. You've heard this before, fools. Winners keep winning. So two approaches that make sense in that they smooth out that singular event of trying to pin maybe a bottom so that you can try to sell higher later. It makes it more of a continuum of an investing decision. You're never going to completely remove the emotion out of investing, but if you don't

have a discipline strategy, you have nothing. But it's still emotionally difficult to look at the drops. And one thing that I've been doing, especially looking at some of the companies I've owned, is revisiting my investment thesis. Why did I buy this company in the first place? And just because it's emotional to see that red on the brokerage account, does that change why I initially bought it? Actually, I recently did that with Lulu Lemon, which I purchased because I thought it had

a strong brand and like a lot of room for international sales growth, looking at some of their numbers, international sales. So this is outside North America, was 14% of Lulu Lemon's total business in 2020. And while it's not an exact comp, Nike does about it. 60% of its sales outside of the United States. So I looked at that and I thought, okay, like, you know, if you want to play the follow the Chinese middle class game on strong American brands, different kind of like luxury brands, this might not be a bad place to do that. So that was kind of the long-term idea I had on that, but I ignored one thing.

I know a lot of fools like the mirror. Hey, Ricky, I love to look into the mirror. I'm a narcissist. Oh, you're not talking about that mirror. I'm not talking about that. mirror. I'm talking about the $500 million bet that people would want to spend essentially $1,400 on this workout mirror, and then $40 per month to have access to those classes. And then recently, shareholders essentially asked, how's that doing? How's people's narcissism holding up? And the answer was not so great. In December, the company cut its full-year mirror revenue guidance in half from the previous range, which was kind of between 250 million and 275 million to about 125 to 130 million.

And like, conceptually, that's even, that's high for me. I'm surprised that many people are getting involved in the mirror. I am absolutely shocked, Osset, that people want to stare at themselves the entire time they work out. Like, I understand the post-workout, gym, mirror selfies, whatever, you want that. But really, the entire time you want to see yourself sweat and strain and work online, I don't know. And then the second thing, the reason I didn't love it is because, this mere, this $40 a month subscription, has really strong competition with these free YouTube classes. The competitive advantage wasn't there for me on that. I just, I liked the international

sales growth. So buried in that quarterly report, Lulu Lemon actually confirmed my idea as an investor or what I was really looking for, which was that international growth is still strong. The company said international sales grew by 42% over the past two years. That's the bread and butter kind of stuff that I'm trying to focus on as a shareholder. But it's hard. when you see these huge drops and news that affect the share price. Yeah, I mean, Ricky, I like your analysis of this company. I like the reasons that you bought it. I like your working through of your thesis, testing the thesis after an earnings report.

But let's take a look at your thesis. I mean, this is something that's very persuasive because Lulu Lemon is a brand that has a lot of cash in places like Asia. The company is one of the few retailers that has a very dominant physical footprint. It's still growing comparable sales. When you combine the physical stores in a sort of post-COVID environment with their online e-commerce portion, they're growing their comparable sales at 27, 28%. So the company itself is, I think, a really fun business proposition in the retail a leisure space. The other thing I'll note is that it's hard not to participate in this connected

fitness world. You almost have to make these investments, whether they become these huge drivers of your outcomes, or they enable you to bring in new customers who want to use the technology. You almost have to do this, and I don't blame them too much. Did they overspend? Probably not over the long term. What we're looking back at is a longer payback period on the investment, But, yeah, I think this will work out for them. I don't want to sound like an old man yelling at a cloud. I mean, optionality is great, but also, like, isn't there an element where you kind of want those companies to focus on what they're good at?

Or am I missing the boat and missing the point on connected fitness? Well, we'll return to this theme later in this show, but I think great management teams are teams that will take some risks sometimes. They like to exercise their imaginations. So, there is that element in this acquisition. And again, $500 million, seems like a big investment. But in the context of their balance sheet and their sales, it's not that huge. So let's come back to this point.

We talk about a few other companies because you've thrown a flag up in my mind. Okay. All right. So I know you've also been looking at some stocks as well, especially ones that have taken advantage of COVID trends, work from home, that have experienced some significant drops lately. Yeah, Ricky. So this is not one that I own. But how could we not talk about Zoom?

It's sort of the poster child for stocks that had a big pull through because of COVID and now are in this ambiguous place. I think it's a fascinating case study for this theme that we're talking about today. Some investors bought Zoom at its peak in, I think this was October of 2020. Its market cap today of 43 billion bucks is close to one-fourth of its peak market cap. of some $162 billion. So if you bought at the top, you're hurting. It's got to hurt. On the other hand, you have a company that appears to be able to sustain revenue growth for the next few years of somewhere between 20 and 30 percent year-over-year annualized.

That company is now trading it just 33 times its forward sales, and it's trading it just 28 times its 2022 estimated free cash flow of some 1.5, 1.6 billion bucks. look at Zoom, it's got $4.4 billion of working capital on its books, has no long-term debt, it's extremely profitable, they're throwing off operating margins of 27%. Between all these factors, this top-line growth, the vigorous free cash flow, this huge balance sheet, you know, management sort of simply needs to figure out how to capitalize on its relationships with 2,500 customers that provide each more than 100,000 bucks in annualized recurring revenue, while it keeps all those middle market companies and small businesses in-house.

And they're doing a lot of innovation on this front. They've sort of migrated over to this vision of a corporate enterprise sales. They're building up their direct sales team. They also are thinking through what it means to be in a hybrid workspace. So, now their investment is geared towards companies having to use their licenses. And, you know, if you've got a Zoom license for a few employees, it doesn't work. If your company has 20,000 employees, you can't have Zoom licenses for just 2,000 of those 20,000. You have to buy it for the whole company.

And this is where they're starting to gain some new momentum in products like the Zoom phone, which is not really a phone. It's more of a platform that incorporates text messaging, video conferencing, etc. But I wanted to say something here, which hopefully will be helpful to listeners who have stocks that are in this ambiguous space after COVID. One thing you can do to figure out what might happen next is to look at the management team and try to assess what you make of their capabilities. Here, in Zoom's case, you're trying to solve for this optimal.

use of capital and their ability to transform their business momentum, which is high right now, into something new. So you like the pivoting that Zoom's management team is doing. You think they're doing a good job at kind of seeing where the puck is going on the hybrid work model? I think so. And I also think that the things we saw in this management team before COVID ever hit are very apparent now. So it's a deliberate team. They execute not trying to race ahead of other companies, but to make sure that they don't slip up. So they are building out some infrastructure of their own that will replace all the cloud infrastructure. They basically

had to place Zoom technology on during COVID. That's going to help them in the long run with their margins. But at the same time, they're not about to drop the ball. And what is dropping the ball for Zoom? Well, Ricky, you and I have a meeting tomorrow, and millions of people around the globe also have meetings, and for some reason, it doesn't work. Even during the peak of COVID, they were always able to handle that load. It sort of shows you how capable they were at execution beforehand. And the other quick thing I'll say here is they've got a very visionary CEO in Eric Yuan. He is someone who foresaw how clunky video conferencing was years ago and worked in an extremely innovative way to build a product that saw beautiful uptake when the world changed,

I think he can repeat this act. It's likely not to have such a big innovation in the future, but the enhancements to the product, which we'll see in the next few years, I think he's the right person to drive those. Speaking of management teams, it's important to look at because sometimes stocks fall and they don't come back. I think poster child of that, Osset, was General Electric. It was the largest company by market cap. And then, in a sense, its falling was emotional. People couldn't believe that this behemoth, this conglomerate, this real symbol of American capitalism fell.

And a lot of it was because of financial engineering, a lot of acquisitions that made it bloated and unwieldy to manage. But you can look back at some of the decisions that its leadership made that focused more on the financial engineering aspects rather than really growing the company and it's capabilities in a coherent way. Yeah, Ricky, when we were preparing for this show, you pointed out to me that GE was worth $500 billion in the year 2000, and today it's worth $100 billion. I really agree with your take on what happened with GE.

They sort of mistook who their true stakeholders were. GE became enamored of its ability to produce very predictable profits for the Wall Street analysts who upgraded or downgraded the stock every quarter, forgetting that their true stakeholders were shareholders, were employees. So, so much of their focus was on the financial aspect of their business, rather than key investments into the industrial parts of their business. And also, I'll say that here we also have to talk about the fact that GE has been a legacy company, right? So its roots go back. decades, and they have a significant pension liability on their books, which is the result of offering

everyone who worked there and attained a certain tenure, a pension. Companies today are not really worked into that system. I think GE doesn't get enough of a break by many analysts who look back on the fact that over a period of time, they built up these huge pension liabilities, and that was also hard for them to get out of. But yes, the world was changing. GE was not innovating among its various businesses. This is sort of a warning sign to investors, isn't it, Ricky? It makes you uncertain with the rate of technological change today.

Hey, what will happen with the stocks that I'm holding? Yeah, and I think one key metric to look at, if you're wondering kind of what leadership is doing and how is it focusing on the future is research and development spending. over the course of Jack Welch's tenure, as they focused more on kind of that financial engineering side, R&D spending fell as a percentage of sales by nearly half. I think that's key to focus in on, is if you're looking for these great companies for the future. How are they preparing for that in a way that isn't just essentially appeasing

quarterly Wall Street analysts? Are they doing something meaningful that will affect them years and even possibly decades down the line? The one example we like to talk about, a lot at the motley fool of stocks falling are the times that Netflix broke, the times that Netflix went down 50, 70%. And one of the famous times was the Quickscher incident in 2011. September 2011, in a move that left many baffled, the CEO and founder of Netflix, Reed Hastings, announces in a Sunday evening blog post, the bivocation of the company. Netflix would become a streaming-only service, while DVD by mail would carry on under the name Quixter, a moniker that is impossible to spell correctly on the first and even the second try.

Hastings correctly saw the potential of live streaming and the eventual decline of the DVD by mail business model and sought to disconnect the two. The DVD service needs its own brand so that we can advertise it. So we've named our DVD service Quickster. But to consumers, it meant a price hike and inconveniently separate accounts, but most importantly, what a dumb name! Quickster's now split into three new websites.

Quickster, Quickster, Quickster. Reid Hastings quickly apologized for any confusion, and within a month, Quickster was dead. But the damage was done. 800,000 members had canceled, and the stock plummeted more than 60%. Climbing back up from the hole would take time. But investors who were able to see the truth of Hastings' long-term vision were duly rewarded. Today, the stock is up 2,671%. Moral of the story, focus on the long-term vision.

There might be stumbles along the way. This has been another amazing moment in market volatility. And one of the things that we talked about in a previous conversation, Osset, was not just the incident itself, not just the Quixir incident, not just how it fell, but how you viewed leadership's response, what Reed Hastings did after the stock fell, and how that compares to a company like Peloton. Yeah, I think here that Reed Hastings showed what a great leader he was in this event.

And I've heard people knock on Reed Hastings as if he's, a little full of himself or maybe high on the arrogance scale. I don't think that's the case. Every successful CEO gets that at one point or another in their career. But to be able to very quickly pivot to look in the mirror, not Lou Lemon's mirror, but the real mirror, the mirror that is right in front of you, I love that he was able to say, okay, I really messed up here. This is one of those cases where stuff is here. the fan, you could easily become defensive in this moment and tell your entire team,

we're going to ride this strategy out for one year, folks, and I will be proven right. And I've seen that movie so many times in the corporate world. So this is something that is another key element of a great management team. What about humility? What about the ability to be really self-critical to quickly understand that you just goofed? an interesting balance, right? Because, look, you have a media executive, you have someone running a streaming service, already caoed Blockbuster. Like, yeah, you kind of want that person to have a little bit of swagger, but how much is too much? And you find out when they make a big mistake.

And yeah, to your point, that incident is something that could have broken the company. If it's something where you split DVD in streaming services, that's a problem that exists internally for you to separate things. You don't make that the customer's problem. You own that problem. And very quickly, that's something that they responded to in a positive and generative way. So true. And to your point on Peloton, I really feel that we have cues about management teams in many crises that occur. So pretty significant for Peloton last year, a small child died using their treadmill. And the company was very defensive upfront about it, Ricky. It took them some time to come back to customers, to their stakeholders, and say, look, we are making changes to this product.

When the initial reaction to something like that is, hey, everyone, you're not really using our product correctly. Well, didn't they also tell their customers they needed to, like, buy this 40, like, extra subscription that had enhanced safety features? I think they may have done that, which, okay, so, yeah. A little shady. Yeah. If that was the case, that's sort of even worse.

But you get these chances to value a management team if you're a long-term holder. And this is the beauty of buy and hold investing. Sometimes you realize that whatever faith you placed in a management team was misplaced, and it's time to get out. And that's perfectly okay. You could have made money in a stock. You could have bought Peloton at some point earlier, and maybe you're holding onto a profit. And if you look at that and understand how important it is that people drive the

business decisions and people create the value, it's okay to sell. Buying and holding doesn't have to be about just making money. Sometimes management teams' decisions quickly bring down a stock price, and sometimes it stays down for a very long time. One example of that is Microsoft, after the dot-com bubble. It took 16 years for it to fully recover. One reason was its focus on the future, maybe some mistakes it made with phones. Here's then CEO Steve Balmer talking about the iPhone. That is the most expensive phone in the world, and it doesn't appeal to business customers because it doesn't have a keyboard, which makes it not a very good email machine.

Now, it may sell very well or not. We have our strategy. We've got great Windows mobile devices in the market today. You can get a Motorola Q phone now for $99. It's a very capable machine. It'll do music. It'll do internet. It'll do email. It'll do instant messaging. So I kind of look at that and I say, well, I like our strategy. I like it a lot. It's easy in retrospect, Osset, to say, oh, of course, you don't need a keyboard on a business phone. Users don't need that. But for a long time, a lot of Microsoft shareholders, essentially were just kind of in this wait-and-see game to see what the company could do with its gaming, what it could do with cloud storage, what it could do with Office.

which was moving from this licensure approach to software to a SaaS approach. You know, Microsoft in Steve Balmer's era was really great at one thing. They were great at optimizing results. They were engineers in every discipline that they approached. So they could engineer a great product. But here again, going back to Lulu Lemon, we talked about the exercise of imagination. This is what Steve Bomber lacked. It was the ability to imagine a different future.

Steve Jobs had this in spades, of course. So it can make all the difference. And investors had that long drought with Microsoft. Why would you have stayed invested in Microsoft over that time period? Well, I mean, they had this wonderful balance sheet still do. Amazing cash generation ability still do. So in those cases, if you're a long-term holder, maybe you wait a decade or more for a change. Maybe you decide your capital can be better invested elsewhere and sell a Microsoft after a few years

when you see that Bomber isn't creating any persuasive new products that are going to help the company grow its revenue at that previous rate that was in the high teens between 20 and 30 percent. You could come back later if they make a change to management, and that's what happened in this case. They brought on Satya Nadella, who was intensely visionary, who had actually worked in a division of Microsoft that was very future-oriented the cloud business, then you can make this decision. I see promise in the way the capital is being deployed today. I'm going to get back into Microsoft.

Management teams that can't go through this exercise of imagination are teams that will end up only optimizing. GE was an optimizer. They were a financial optimization firm by the end of the day. So, this is one of those intangibles. If you're listening to this podcast thinking, I don't have deep accounting chops. I'm not a finance person. How do I figure out what's going on with my company?

I love to look at interviews of CEOs on YouTube. I love to read over widely, freely available, often at theful.com, transcripts of company conference calls. And that's where you can find more detail about the people who are running the company. So important. And you talked about the management decision at Microsoft. One thing they started doing was making smart acquisitions. One in particular that investors kind of hated at the time was LinkedIn. And that's turned into be a revenue cash cow for them. I think that sort of track record is now one reason that people are very excited about the Activision Blizzard acquisition for Microsoft.

And looking at these acquisitions and smart acquisitions, that was one thing that going back to General Electric that kind of brought them down, even in 2016. they decided to buy out a company that made cool-fueled turbines used by power plants for $9.5 billion. John Flannery, then CEO, later told CNBC, quote, if we could go back in the time machine today, we would pay a substantially lower price than we did. So a company with a management team like Microsoft, they have the cash to make these smart acquisitions, but they aren't necessarily forcing their hand. Ricky, I love this point because forcing your hand is what happens when you're playing behind.

GE was desperately looking for some investments that would generate tremendous value. They thought they were a strategic buyer in the Alstom deal, but really they were buying a very decent asset at a high price. And as you point out, Microsoft is very savvy in how it allocates its capital. Let's go back to Zoom. The point about this management team, I think they're going to be shrewd allocators of capital. They tried to buy $5.9, $15 billion deal that I thought would have been pretty great for their business. Didn't go through, but I think you're going to see some of the smaller, smart acquisitions, as you call them, strategic acquisitions ahead for Zoom. Microsoft certainly has that skill.

And for one last stock drop that is good to remember is Chipotle, which had some problems. with people getting sick eating their food. November 2015, Chipotle is under attack. Numerous outbreaks of E. coli, salmonella, and norovirus are linked to locations from Massachusetts to California. Chipotle, the nation's leading fast casual restaurant chain at the time, long pride in itself on using high-quality healthy ingredients, but now found itself in the middle of a PR nightmare.

Even though Chipotle chose to introduce a new food safety program, shut down all operations for an afternoon for health safety education. Our commitment, much like food with integrity to bring the very best ingredients best ingredients to fast food. We're now saying we have practices that will make it the safest place to eat. And give away 21 million burritos, the stock still took a hit down almost 40% in just a few months. It would take roughly four years of Chipotle showing they could deliver on their promise of food with integrity for the stock to recover to pre-ecoli highs. For investors who held through it all, they earned a return of more than 500% from the bottoms to today. Moral of the

story, if a company breaks their strong brand promise, it will take an outsized reputational hit, but with persistence, the stock can still recover. This has been another amazing moment in market volatility. And Asset, this is another case where you saw leadership face a crisis and multiple crises, if you will, and hit the accelerator in an interesting way. Take ownership for what happened and immediately look to essentially delight their customers, bring them back in the doors, and fix the problems they had with the foodborne illnesses. Yes, I remember thinking at the time it is going to be.

be years before Chipotle stock recovers from this. But on the ground, Steve Ells and Monty Moran, who no longer run the company, were doing all the right things. They put in a ton of procedures that essentially safeguarded the food from this type of crisis happening. Again, now, that's not to say that we couldn't see another food crisis with Chipotle, but I think the probabilities have substantially decreased from all the procedures that they were able to implement. But to do that, they had to take a hit on the restaurant margin. So they had to take this short-term, near-term hit in the interest of being able to eventually get back to their business proposition, which is simply a throughput proposition, right? The more customers we can get through the door in an hour,

the more money we make. Eventually, with a new CEO and some management innovation, they've been able to increase their throughput. COVID certainly helped. And the stock has really recovered in the intervening years. But taking responsibility, being able to say quickly, okay, we've messed up here, how do we fix this for the long term? Those are other traits of great management teams. And they gave away freakwalk. And it's amazing how that brings people back in the door. I was so hesitant to go back, and I think it was finally one of those offers that got me to eat a burrito from there. Maybe we'll get Listeria, but I'm definitely going to get some free steak burritos. So, Ascid, I think it's good to close up on some, you know, if you're looking back on a company

that's fallen, if you're looking back at your investment thesis, these are some questions I like to ask myself to say, okay, was my thesis wrong? Should I change what I'm, should I change my approach here? Or should I kind of keep my head down and keep going, which is probably the better option or usually the better option when a stock falls? One question, is the company getting creative with its accounting? Are there lots of high level executives heading for the doors, right? General Electric, for one example. They were used to be a company. using a lot of proprietary sort of financial metrics that obfuscated what was going on with shareholders.

Number two, is the company reacting to whatever its problem may be with next quarter solutions or is it thinking long term? I think that's a critical thing to look at is, is management really focused on the future? Number three, is the company handling its balance sheet in a responsible way, kind of going back to that smart acquisition approach? And then number four, are there cultural, institutional problems that you're concerned about? One thing we like to look at at the full is glass door ratings. How do employees at the company view working there? Are they holding onto talent?

Yeah, Ricky, I love this checklist. I think these are really fun and cogent big-picture questions to ask. Listeners can make your own list, but you could just copy Rickies here because these will uncover some of the observations that we've sort of made in retrospect. over a lot of companies during this conversation. You can do this work at home, very simple. I really like, number two, is the company reacting to its problem with next quarter solutions. That's sort of simple to see when you look ahead at what a company should be doing for a multi-year period. You compare that to what they're doing on the ground if they're having some issues. Usually the difference is falling out in the wash.

Yeah. So, Ricky, this has been such a fun conversation. I was curious what you're going to do going forward. The market is still pretty rocky here. I feel like I'm settled just talking with you looking at my portfolio. For me, personally, I'm going to just try to focus on the businesses rather than stock price. I always do that. How are you going to be approaching your portfolio in the coming months? So I'm a dollar cost averager, which is I have a certain amount of money that I set aside for for stock investing every month. And no matter what the market's doing, that's how I go about it. I'm not trying to play games. You have a certain amount of money that comes out of your paycheck and goes into your investments. I think for me, that's what I'm going to do is continue to dollar cost average my way in and focus on the long term. I'm relatively new at the investing game. I'm relatively young. So this kind of thing really doesn't concern me. me when I know I'm going to be writing this out for the next 40, 50 years realistically,

hopefully. Sounds great. Next time we chat, I'm going to ask you if you bought some more Lulu Lemon. We'll see. Thanks a lot, Ricky. That's all for today, but coming up tomorrow, a conversation with Morgan Howsel. 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. Don't buy ourselves stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow. Thank you.