Motley Fool Money - Money Advice from Moms

Episode Date: May 11, 2023

Spending, investing, dealing with debt...moms have seen it all. (00:21) Tim Beyers discusses: - Disney shares falling after a lackluster 2nd-quarter report - The fate of Hulu - Why The Trade Desk is an attractive business (with a richly-valued share price) (11:17) Mother's Day is on Sunday! To celebrate, Lysha Fuentes, Jim Mueller, Anand Chokkavelu, and Jim Gillies share money lessons they got from their moms. Got a question about personal finance? Email [e-mail] and your question might get used in next week's mailbag segment! Companies discussed: DIS, CMCSA, TTD Host: Chris Hill Guests: Tim Beyers, Lysha Fuentes, Jim Mueller, Anand Chokkavelu, Jim Gillies Producer: Ricky Mulvey Engineers: Dan Boyd, Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

Okay, caller one wins court side seats to tonight's game. What? I won floor seats? You did. I've been calling for 13 months. Wait, Chris? Yes, I finally did it. What are you going to wear? Men's Warehouse. They've got today's looks for any occasion, and I need to look like a celebrity.

Don't want to stick out. Exactly. They've got Chill Flex by Kenneth Cole, Joseph Abude, and a tailor at every store for the perfect fit. Congrats. You can stop calling now. Not a chance. Hit any look for every occasion at Men's Warehouse. Love the way you look. We've got a motherload of money advice. Motley Fool money starts now. I'm Chris Hill joining me today, our man in Colorado, Motley Full Senior Analyst, Tim Byers.

Good to see you. Good to see you too. Fully caffeinated, ready to go. Likewise. Would that shares of Disney were fully caffeinated? Instead, they are down 8% this morning, because stop me if you've heard this before. The theme park, the park, part of the business was strong in the latest quarter. but the streaming business, and maybe the streaming business gets an outsized amount of attention, but it is what it is. It's getting closer to profitability, but they lost 4 million subscribers.

And I think that along with a few other things probably is what has people spooked. In terms of the results themselves, what stood out to you? Well, let's remember. You're right that they're not losing as much and we're inching closer to profitability in terms of Disney Plus. However, direct consumer operating losses for the quarter, we're at $659 million. That is down or better from $887 million in losses last year during this time. But like you said, they are losing subscribers. That is not a good look.

That is not a good part of the business. Overall, the domestic contribution from Disney Plus for this quarter was down 1%. That's in terms of paid subscribers. So not great. Overall, down 4 million. Also not great. But guess what? Sports ball is still sports ball, Chris.

I mean, up 2% was ESPN Plus here. So what I like is that Disney is recognizing that Disney Plus as its own asset needs help. And so there does seem to be more of an emphasis on the Disney bundle because the Disney bundle, I think, works Disney Plus not so much, at least not yet. So, that does stand out to me, this idea that we're going to see maybe more Hulu originals that find their way into Disney Plus. I think we're seeing the weakness of a business, and I'm speaking specifically about Disney Plus here, Chris, that relies on historical content. I said this on the morning show, so I'll repeat it here, but only for the purposes of

illustration. Disney Plus, in a way, is like Turner Classic movies. It's amazing. I love Turner Classic movies, but it's where you go for the hits. I go to Disney Plus for Star Wars. I go for Marvel. I go for known entities. And I'm not really surprised by what I get at Disney Plus. And what we're finding here, Chris, is that after a while, well, I'm not surprised anymore. So I'm kind of tired. and I cycle out and I go on to something else. Can you tell me where Hulu is going to be in a year? Because increasingly, it seems like Hulu is this football being passed back and forth, at least in the business media between Comcast and Disney.

And as soon as I hear one of the companies talk about the virtues of it and why they like it, in the next breath, it's like, yeah, but we're probably going to sell. Who wants Hulu? Like, not from a you and me and the dozens of listeners consumer standpoint. As a business, where is Hulu going to end up? I'll tell you where I hope it ends up. I hope it ends up with Disney because I do think that Disney needs more fresh programming injected into its direct consumer efforts here. This is one of the things that makes Netflix an interesting and more resilient business than what we're seeing from Disney Plus is that there is always something fresh. Now, does that mean that Netflix has no stinkers? No, of course not. They put out stuff that's terrible, but they put out a lot of stuff.

And so when something is not hitting in the U.S., it might be hitting in Brazil. It might be hitting in South Korea. It might be hitting in Japan. There's a resilience to that because there is always a constant stream of new. Disney needs that. They need some fresh injection into what they offer with Disney Plus so that they can justify the higher overall subscription price they want to charge for their business. So I really hope that Hulu ends up with Disney, Chris, because I think that Disney needs it more. Last thing on the stock, I get the short-term questions, particularly when you layer in the uncertainty

of the writer's strike and how long that will go and what the ripple effects will be for the business. You layer in the uncertainty of Bob Eager is the CEO at the moment, but who's going to be next. But long-term, do you look at the stock trading downward as today and think, no, that's the Now, this seems like a pretty nice entry point for people who are willing to be patient. I want to say yes. The reason I'm going to say a strong maybe is because you could have said that so many times over the past several years and really gotten nothing for your efforts. So what I really want to see before I say a strong yes here, Chris, is an operational plan for the direct-to-consumer business that scales it to consistent operating profit.

And we are nowhere close to that yet, Chris. So as a Disney shareholder, I have no designs on selling my shares, but I am not in the mood of buying more at the moment. First quarter revenue for the trade desk was 21% higher than a year ago. I don't want to say that this was all sunshine and rainbows in terms of the results from the trade desk, but free cash flow is up, margins are up. The business is, for the most part, doing what you would want to see if you were a shareholder. That is absolutely right.

I mean, and let's just park on those cash flows for a second here, because that's pretty important. So year over a year for the quarter, 187.5 million in cash from operations versus 146.2 million year over a year. The contribution from stock-based compensation in that time was down. So this is not juiced by artificial sweetener here per se. This was just a better operating report. Good improvements on working capital, for example, accounts payable, an outflow last year of

about $246 million versus an outflow of about $200 million this past year. So just a better operating quarter. And so they're generating free cash flow, not enough to cover the stock repurchases during the quarter, Chris, but covering a fair amount of it. This is a business that is getting better. I want to park briefly on the stock repurchase, which I think is a good sign for the trade desk. So the overall, 5 million shares repurchased, about 293 million for that.

So you're looking at about $59 a share. Stock trading higher than that right now. do issue a lot of stock-based compensation, so this is not perfect. But if you're going to buy back shares and you're buying them back at lower prices, then your stock is trading, yeah, that's pretty good. That's not bad. So they are doing better here, Chris. The stock is down a little bit today, but even with that year-to-date, shares of the trade desk are up 40%. How richly valued is this stock right now, in your opinion? I do think it trades for a premium. I think the reason you're seeing it down today has as much

to do with the change in chief financial officer. So, you know, Grayson, the CFO is stepping aside for a long-term employee who's stepping up into the role. She's got 20 years of experience. So I could see why the stock is trading down a little bit on a down day here. It does trade for a bit of a premium, but I like the sensibility that Jeff Green is bringing to the business. I'm going to see if I can quote something here on what he said about AI. And everybody's talking about AI, but the way that the Trade Desk talked about it, I think is a bit more important. The way that he talked about it is that the Trade Desk has a huge amount of very specific data

that it can use to train its systems to get better at the trade desk. serving clients. So for those who don't know, the Trade Desk is a demand-side platform. So when you want advertising, when you want to buy advertising, it does behoove you to get really good bids and really good insight into how the advertising market is evolving. So this is a really good use case, Chris, for AI. If you get better insights from a really large dataset and better predictions about what that data will tell you, that's an outstanding case for AI versus ChatGPT, which is like, we got a blob of everything in here, and what do you want to ask? And maybe we'll have an answer, or we might mansplain something to you, and you'll want

to punch us in the face, which is more like what you get from ChatGPT. There is actually a real use case for AI. in the trade desk, and I think you're starting to see just the very beginnings of what they can do with that data. Tim Byers, always great talking to you. Thanks for being here. Thanks, Chris. Just in case you forgot, Mother's Day is on Sunday. And to celebrate, we rounded up a few of my colleagues to share a few money lessons they got from their moms. Happy almost Mother's Day. In celebration, we asked four fools, one question. What did your mom teach you about money. Up first is Lisha Fuentes, who works on Motley Fool events.

My mom taught me the value of making extra payments towards any loans I may have. So whether that's mortgage payments or car payments, this will ultimately help me make fewer payments in the long term and lessen those interest payments. Next up is Motley Full Senior Analyst, Jim Mueller. My mom taught me the value of saving and paying up for quality to buy something that is going to last a while rather than buying an inferior version over and over and over again. Okay, and the example may not be exactly that way, but that's what I took from it. When I was growing up, we ate very well, and part of it was because every year she would buy half a cow. It sounds funny, and when I say that she's stuck it in a chest freezer, I'm not

talking about legs sticking out of the freezer or anything. This is, she bought it straight from the butcher, so she got a lower price. and it was a higher quality because it was freshly butchered cow. And so we had steaks and ground beef and roasts and ribs and all the stuff you get from a cow. And she wouldn't have to buy it from the grocery store and pay a higher price all throughout the year. And so she ended up saving money, but the upfront cost of the half a cow was quite a bit, quite a lot of money. And so she had to budget and save up for that. And then she'd make it up on the back end after, but not how to.

having to buy steaks and ground beef throughout the year from the grocery store. So that's what she did. And I know it can be hard for people, especially when they're living closer to a paycheck to paycheck level. But if you can, for instance, shoes, rather than buying sneakers that are going to last a year and wear out, save up and pay two or three or four times as much, but get a pair shoes that'll last six or seven or eight years. And you end up saving money over the long run that way. So that's what she taught me. Next is Annen Chalkavalu, the Motley Fool Live Streams

Programming Director. My mom ran the finances in our house. And she's an immigrant who came with zero knowledge about finances. But she taught me kind of three things, I think, that I took away from all of the discussions and watching her over the years. One is to keep asking questions. until you understand. A lot of us are just say, well, you know, I spent some time and you don't quite understand. You don't want to show your ignorance and you hear some jargon, but she will just keep as I've heard her on the customer service lines, the poor customer service representatives when she doesn't understand the nuances of something. She will just keep hammering away. And that's something I try to get better and better at the older I get. The second thing is

buy and halt. You know, I look at some of the stocks that she bought. in the 80s and 90s, probably the 90s, and she still owns them, and they're like blue chip type of stocks that have just, you know, it's amazing to see compounding over the years and you really see it when you buy and hold. And the third thing is temperament over anything else. And she's very calm. And I told you she keeps asking questions until she understands, but she buys and holds. She's not going to make rash decisions. And if they are, they're on the margin and very small. She's not risking everything on one silly bet that she thought of this morning. And finally, we've got Motley Full Senior analyst Jim Gillies.

Inadvertently, I'm going to say inadvertently. My parents, lovely people, salt of the earth, give you the shirt up their back if you needed it. But my mother is the seventh child of a de facto single mother who lived through the Great Depression. My mother really learned the value of stretching a dollar and then stretching it and then stretching it a little bit more. Growing up, my father was primary breadwinner. My mother stayed home with us kids for a lot of the time. And then I would argue my mother was underemployed for a lot of her career. She was a teacher. And we never wanted for anything. So what you learn from your parents and particularly mom about money, you know, we were always fed. We had a roof off our head. We knew we were loved, like all of the wonderful stuff.

However, my mother is responsible for me working for the Motley Fool today, which is kind of a strange thing because, you know, it's kind of a sliding doors. I don't know, people don't even know that reference anymore, but, you know, sliding doors, you know, you turn left instead of turning right and your life unfolds in a way, perhaps you didn't envision it. In, I believe it was 1996. My mother, my parents had recently paid off their house at that time, and, you know, they were in their 50s, and so the possibility of retirement and golden years is kind of staring

them down the face. My mother expressed an interest in learning this investing thing. Now, my background is, I have a couple of engineering degrees. I was a perfectly happy, so I thought engineer working in process redesign for environmental purposes. Decent little career, I was still fairly young, decent little career starting out. I knew nothing about investing. was never, ever a topic in my house growing up.

So here's mom talking about, well, I'd like to start investing. At the time, I live on the west side of Toronto, and at the time they lived on the east side of Toronto. So I was going back for a weekend, a Mother's Day weekend, specifically in 1996 to say hi to mom and dad, maybe meet with some friends, take mom out for Mother's Day brunch and all that wonderful stuff. And the gift I bought her, I went into a bookstore, and I bought two. Two books on investing. I don't remember what the one book was. It was probably some Canadian

compendium mutual funds or something. But the other one was a book with a couple of guys with silly hats on the front page. Almost gesture caps, if you will. Fools caps, if you will. And I kind of looked at the back. I'd never heard of the Muttly Fool. I had no idea who Tom and David Gardner were. But it looked fun. It looked fun. And so I thumbed through it. I said, oh, you know, this might be kind of interesting and, you know, it's not boring financial stuff that, you know, might cause mom to look at it and go, eh, whatever. So, you know, we went out for brunch on Sunday morning and that was mom's gift and I didn't really think anything of it until about a year later. When again, I was visiting mom and dad for a weekend and I think I had a bout of insomnia and I really couldn't fall asleep. And this is like Saturday night at like midnight.

I'm like, I want to go find a book that I can just read and just kind of it'll, it'll, it'll, dull me into stupor. And I saw the Motley Fool investing guide sitting on the shelf. Looked like it had never been read. So I said, okay, what the heck? So I grabbed it. Started reading, I think I was up until about three in the morning reading this. It just inherently made sense to me, the concept that you as an individual can invest and it can invest for yourself. And it covered things like, you know, some rudimentary valuation, metrics, it talked a little bit about business and business strategy, you know, about the value of rising dividends.

I think Coca-Cola featured fairly prominently in the book as an example. And I was hooked. Mom, if you're listening, I stole the book from you that I gave you a year earlier. I stole the book that day. I took it back to where I was living on the other side of Toronto at the time. And I read the whole thing. And that book, reading that book, kind of sparked to me. There was a lot of references to Peter Lynch in there.

So, of course, the next logical books to get were Peter Lynch has won up on Wall Street and beating the street. Devoured those. Really got into looking at some of the other famous investors they talked about. Some guy named Buffett, you know, featured prominently as well. It sparked a love of investing that I didn't know was there and didn't know I had. Because, again, as I mentioned, investing was not a topic that was ever discussed in my house growing up. You know, kind of one thing led to another. Ultimately, I left my engineering career after about nine years.

I quit without a plan. I quit without a plan to go back. I did an MBA in finance. Invested my money since the late 90s personally, since about 97 personally. And I've now been with the Fool. It's going to be 18 years in July. I was very active in the old Motley Fool investing forums, and that's where I got to know Tom and David.

One thing led to another, and it comes back to me buying some random book for Mother's Day for my mother, and then a year later, just deciding to read it for myself. I mean, and it's kind of one of those things where if I don't buy that book, do I ever move into investing? Do I ever discover this latent passion for a topic that I literally do. really knew nothing about until that was in 1997. So, Mom, if you're listening, thank you. Quick note before we go. Next Monday, Robert Brokamp and Allison Southwick are recording a mailbag segment. So if you've got questions about all things personal finance, drop a note to

podcasts at fool.com. 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 ourselves stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.