Motley Fool Money - Rates Go Down, Market Goes Up

Episode Date: September 20, 2024

Low rates are great for stocks, as long as we’re looking at a soft landing. (00:21) Ron Gross and Asit Sharma discuss: - The Fed’s 50 bps rate cut, the market’s reaction, and what history has to say about cuts this dramatic. - Nike’s CEO swap, what went wrong for John Donahoe and whether Elliot Hill has what it takes to turn the company around. - A new partnership masking bad results from Olive Garden, and FedEx’s signals about shipping trends. (19:11) Reddit hit the market in 2024, but it’s been around as the front page of the internet for almost 20 years. CEO Steve Huffman joined us to talk through how the company stands out in the world of social media with its focus on community, where it has been and where it is heading. (33:26) Ron and Asit break down two stocks on their radar: D.R. Horton and Intel. Stocks discussed: NKE, DRI, FDX, RDDT, DHI, INTC, Host: Dylan Lewis Guests: Asit Sharma, Ron Gross, Steve Huffman Engineers: Tim Sparks, Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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Rates are down. and markets are up. Motleyful Money starts now. That's why they call it money. The best thing. Cool Global headquarters, this is Motley Fool Money. It's the Motleyful Money Radio show. I'm Dylan Lewis. Joining me over the airwaves,

Motleyful senior analyst, Ron Gross and Asset Sharma. Fools, great to have you both here. How you doing, Dylan? Great to be here, Dylan. I'm doing great because we have plenty to talk about. We've got another CEO change at one of the world's biggest brands. I've got a rundown on one of the bigger IPOs of 2024. straight from their CEO. And we also have stocks on our radar, of course. But really, we are kicking

off this week with a look at the big macro, because, Ron, how could we not? The Federal Open Market Committee convening this week, deciding to cut the core rate for the economy by 50 basis points. We knew going in what direction things were going to be heading. We did not necessarily know the magnitude or what the market would make of it. Oh, boy. Big, big, big day. We were waiting. It's the first rate cut from the Fed since it began hiking in March of 20. 2022, marking a pretty big and I would say long awaited shift in monetary policy. Powell, Fed Chairman Powell, to you and me, categorized the Fed's latest cut as recalibrating policy down over time to a more neutral level.

Now, that word recalibrating is a word that the markets have really focused on. As one analyst put it, using the word calibration allows Powell to push this narrative that this is an easing cycle is not about us being in a recession. It's about extending the economic expansion. So a little nuance, a little slanting there. But then we got weekly jobless claims that fell 12,000, and that was far below estimates, reassuring people that we look like we're actually maybe have achieved this soft landing

that we have been talking about for so long on this show and on every other show out there. So it is an exciting time. The Fed projected lowering interest rates by another half point before the end of 2024. They have two more policy meetings to get that done. And then through 2025, their Fed forecast interest rates landing at 3.4%. And then through 2026, rates are expected to fall to 2.9%. So at least the pundits and the Fed, they are signaling lots more rate reductions to come.

They increased their expected unemployment rate this year to 4.4% from 4%. And they lowered their inflation outlook to 2.3% from 2.6%, which is approaching that 2% target that they talk about so often. So when this all happened on Wednesday, stocks were mixed. They eventually turned negative. Everybody got a good night's sleep, decided, you know what? Things are perfectly fine. Stocks shot up on Thursday.

All is well, Dylan. You know, before the announcement, we'd had a little mini pool going just for fun. Ron, Asset, you guys both had a 25 basis point drop. We had different ideas about what the market reaction could look like, and I think just goes to show how difficult it is to anticipate these things. But as all the dust settles, Ron, you mentioned. The market reaction, very strong. Asit, we're looking at the S&P setting a new all-time high on Thursday afternoon.

Yeah, Dylan. And what's a little surprising in this is the breadth of the market was very strong, or maybe that's obvious to market watchers. Okay, the Fed has changed its posture. Everyone should participate. We had an amazing day on the NASDAQ as well. So the NASDAQ rose 2.5%. And this surprised me a little bit because typically you'd expect what's leading the market forward to take a breather. And it's not to say we didn't see the other sectors you'd expect come into play. Housing was strong. Consumer good stocks were strong. But this, This is the interesting thing when we think about how the market moves forward from here.

Tech is still going to participate. The reason is that a lower interest rate environment is going to free up capital among lots of companies to make those investments in technology, be it artificial intelligence, the cloud or other initiatives they've been holding back on a little bit because capital has been tighter. It's been more expensive. As the cost of capital decreases, some of these big balance sheets that are associated, with tech companies are going to unleash. And then the companies, enterprise businesses, which buy

stuff from the big tech companies, they're also going to unleash their balance sheets. That helps prime the economy. So I think investors, as Ron said, initially a little at sea on how to interpret this, woke up the next day thinking, wow, this is the beginning of a new posture. And we can see those smaller 25 basis point cuts in the future. This is going to be good for business. And we're going to go ahead and invest. So the market took a really, I think, positive interpretation of the result. And I think one thing we can learn from the predictions that we made for fun on Tuesday and got completely wrong, at least in my case, was that you don't really need to focus on a minutia, 25 basis points, 50 basis points. Is the market going to be up on one day versus down on one day?

If you're going to take the macro economy into account when you look at investing, think of it broadly? Do we seem like we're on good footing? Is the economy growing? Is inflation coming down? Our interest rates, at least over the last 10 or 20 years, have they been historically low and then perhaps historically high? And we need an adjustment. You don't need to be so hyper-focused. It can get fun, and we like to talk about it on the show. But general directions are much, much more important than being hyper-focused on any one metric or any one day. I'm just going to disclose here, our actual predictions. So you said the market would not have that great of a day because you expected a 25 basis point cut. And I said to be cute, well, I also expect a 25 basis

point cut, but the market by the end of the day is going to finish in positive territory. I draw two things from us both being wrong. Number one, on a personal level, I'm not that great at predicting the Fed's moves. Number two, I think there's a virtue in staying mostly like, business-focused versus shifting to too much of a macro-focus as investor. If you choose wisely, you're going to invest in companies that can withstand the stresses of a rising rate environment, and they'll benefit on the back end when interest rates start to ease up. I agree with everything you guys said. I'm going to do a mix here of focusing on the minutia, to quote Ron, and also taking that broader view. If we look back, 25 basis points has generally

been the Fed's preferred denomination for moving things around. And the times that we have seen a 50 basis point move in recent memory, early 2001, 2007, and then March 2020 with COVID. And Ron, I look at those times, and I think about right now, talking about perhaps a soft landing, this feels like a comparatively calm period relative to some of those other ones. Do you feel like the magnitude of what we're seeing here is more a response to how quick, rates went up? Yeah, the relatively calm is the soft landing. It's almost synonymous, right? If it really does happen, and I think we have to call it pretty soon because if six months from now we go into a recession, you can't see, we had a hard landing because that's so far in the

future. But right now, with inflation coming down, economic growth continuing, unemployment going up a bit, but still being what some, at least in the past, would have considered full employment still at these levels, things look pretty good. The market's not cheap, but history tells us then when, if you look back 40 years, J.P. Morgan did a study, finding the Fed has cut rates 12 times with the S&P 500 within 1% of an all-time high. The market was higher a year later, all 12 times, with an average return of around 15%. Not too shabby. I'll take 15% all day long, Dylan. Not to be too much of an optimist here, but there's a scenario that we had in the mid-90s where, okay, we didn't start with such a big rate cut, but long-term rates were about

where they are now in that 6 to 7 percent range. And Alan Greenspan had this series of 25 percent basis point cuts, and that was really stimulative to the economy. The stock market had a pretty good rise during that time, so we could see a scenario like that as well, potentially. need a week on a positive note or trying to. Coming up after the break, we've got a major CEO change, another one. Will it get this iconic brand back on track?

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A couple of big bellwether companies reporting this week, and we've got a CEO shakeup to sort out. The Greek goddess of victory will have a new chief executive to try and return it to its winning ways. This week news out that John Donahoe will be. stepping down as Nike CEO. He'll be replaced by Elliott Hill, who will be coming out of retirement to rejoin the company where he spent over three decades. Osset, we have spent a lot of time documenting the troubles over at Nike on this very show. Are you surprised to see Donahoe out? Not really, Dylan. I think that Nike has some self-inflicted problems that it's recovering from, even though that got masked coming out of COVID, where it looked like they were firing on all cylinders.

Donahoe did two things that were really critical to Nike's future when he took over in 2020. First, he favored this more data-driven approach to new products in favor of using analytics to design new, like shoes, technical clothing, et cetera, versus all this human knowledge that had been built up through decades of expertise. I'll note they walked back that decision late last year. The second thing that Donahoe did, which was really critical to where we stand today, is Nike, leaned into this direct-to-consumer model. So selling directly to us, driving consumers to Nike's website at the expense of its wholesale business. Now, that wholesale business is what you or I would refer to as the retail side. So think athletic stores, department stores, and boutique running shops.

When you combine these two things, that data-driven product decision for making new products, and just this willful de-emphasizing of the wholesale relationships, two things happened. One, we saw a decline in innovation that customers have always associated with Nike products and the Nike brand. And it opened up the door for smaller brands to forge these relationships with wholesalers and take up that shelf space that Nike was giving up. Just look at the all-important running shoe business, which is still, I think, the economic core of Nike. It's the spiritual core of the company. We've seen an explosion in brands like Hoka, On, Brooks, and others. So you can see where this is heading, Nike's financial results have been deteriorating. And in June, the company gave its

worst quarterly outlook in years. So something had to give. I think it's still like a sterling brand. They've got a lot of resources. Elliot Hill, who's worked at the company for decades before he retired, has a decent shot at getting back to Nike's original business model and rekindling that innovation, which might turn the ship around. Yeah. When Hill was last with the company, he was focused on marketing and commercial ops for Nike and also focused on the Jordan brand. I'm going to put it to you with him coming out of retirement, Asset. Are we getting Michael Jordan coming back to the balls in the 90s? Or are we getting Michael Jordan coming back to the Wizards in the early 2000s? I'm going to put my money on the Michael

Jordan of the 1990s. And I think this is such a great metaphor you bring up, Dylan, getting back to that storytelling that Nike was so renowned for being able to inspire customers to want shoes. to want the clothes. And combining that with really great product is where they've always excelled. That's their flywheel. And in particular, I think Elliott Hill has seen this story before. He's seen it play out. He knows what to do. And I think that's at least where they're going to head and where they're going to try to rekindle that magic. You know, I'll say as an investment strategy, I love looking at iconic brands that are somewhat broken. It actually works quite a bit of time. not always. You have to do your analysis and your research. But this could be one like that. A few weeks

ago, a buddy of mine asked if I like Nike, and because I'm an investment professional, I said something very wise. I said, yes, if they can get their act together, which is a very deep analysis of Nike. But this change at the top could be a first step towards that, but it's only a first step, because they do need to walk back some of that multi-channel strategy that they implemented years ago, get back into retail, as Asa said. But you know what? The shelves are now full with On and Hoka and others. So it's not going to be the easiest thing to, it's going to take some time. But at 26 times, earnings versus on at 50 times or underarmored 33 times, I mean, it's not the cheapest thing in the world, but if they can improve earnings, that multiple gets a little

bit more reasonable. And I might be willing to wait and see what happens. All right. Over to the earnings beat. We have kind of an interesting. quarter from Darden restaurants, Ron, top and bottom line came in below expectations. Company reaffirmed its full-year outlook. Market didn't really seem to mind too much. Exactly. It's exactly what happened. It was worse than expected, but the stock popped, which I think was largely due to a new deal with Uber Eats. And they did reiterate full-year guidance to indicate maybe things aren't as bad as some might think based on this quarter. But the quarter was a bit of a mess. Total sales increased only 1%. And that was really,

driven by the fact that there were new restaurants, 42 of them, because same store sales were down 1.1 percent, led by Olive Garden, which was down 2.9%, which is a pretty major disappointment. Longhorn Steakhouses was really the only division with same store sale increase at 3.7%. So management said the significant step down in traffic during July, which is what led to earnings being lower than expected. but Dylan, never fear because Olive Garden is reviving all you can eat, never-ending postable later this month as part of an ongoing effort to bring back customers. So I think good things are on the horizon. Adjuster earnings were down 1.7%.

But they do think things are looking up. This partnership with Uber Eats, it's a test. If it works, it'll expand to more than 900 locations, Olive Garden locations next May if the pilot is successful. So we'll have to wait and see. They're still integrating their Chewy's acquisition. It's not actually in results yet. Ruth's Chris is actually completed, but it's not really in results yet as well. So we'll keep an eye on this one.

A little bit of a messy quarter, though. All right, bringing us home and maybe bringing slightly fewer boxes to your home, FedEx. Like Darden, missing the mark on expectations, Ron. Unlike Darden, the company also lowering its expectations for the rest of the year, we look to this business for a sense of what is going on in the economy. What are you seeing? Yeah, there is some concern that this is an indication of a weak economic outlook. I'm not sure. This might be more FedEx related or cyclical than structural, but cyclical would not be great either because that could speak to somewhat of a weak economic outlook for at least the time being. But in particular,

this company, I mean, the results were pretty, pretty poor, at least significantly worse than expected, with revenue actually down 0.5%. The FedExpress division, which is the merger of their ground and their FedEx Services division, had lower operating results. There was a decrease in shipping volumes on U.S. domestic priority packages. International did a little bit better offsetting that, but customers were trading down to cheaper options, which really does take a buy. out of margins and profits. And that's where people are saying, well, in a kind of a lackluster economy, you can kind of, you don't need to have such urgency to get things quickly to where they need to be.

And some people are extrapolating that that could be an economic problem. I'm not necessarily sure yet. We'll see. CFO John Dietrich said recent pricing actions are expected to help offset weaker than expected demand trends. Another wait and see. I think my thesis here would be a lot to wait and see here. They did have to cut projections, trading only at 14 times, the low end of that guidance versus UPS around 16 times. UPS also has its

struggles. But they're really focusing on cutting costs, taking some of the fat out of the system, $2.2 billion of permanent cost reductions is what they are aiming for. Let's give this another quarter, even another six months, and see what the trajectory looks like. I just found it interesting that FedEx had signal to the market last year, that we're not really this volumes growth story anymore, but we're going to be a great earning story. We're going to cut costs, as you mentioned, and we're going to be much leaner and more efficient on the operational side. And I think that's a work in progress. But this quarter is just interesting in that it's, again, a volume story. So what if volumes are even weaker than you expect? Then what kind of story are you?

But I agree, you know, in general, it's not something that can be solved. overnight. And, of course, we've got, as we've been talking about, an economy which maybe is going to lean a little bit more towards growth as we get into further rate cuts. All right, Ron Gross, awesome, Sharma. Fells appreciate you being here. We can't come back to you in a little bit on the show. Up next, we've got a rundown on a growth story, 20 years in the making, and one of the more interesting IPOs of 2024. Stay right here. You're listening to Motle for money. Welcome back to Motley Full Money. I'm Dylan Lewis. If you're like me, you know Reddit as the front page of the internet, and if you don't, maybe you know it as one of the more interesting

IPOs of 2024. The company debuted in March and since has posted soaring user and revenue growth. This week, Reddit CEO Steve Huffman joined me to talk through how the company stands out in the world of social media with its focus on community, where Reddit has been, and where it might might be heading. It's a treat to talk to you because I'm a longtime user of Reddit. I first started using Reddit in college, and that was, I want to date myself too much. That was over 10 years ago. And when I started using it, it was kind of a mix. It was for the memes, but also, you know, I was kind of learning how to dress myself. And so I was going to Our Male Fashion advice and trying to pick up some tips there. I was going to school in Boston. And so I was trying to

figure out what was going on in the city and what I needed to know about events. And so I was going to R Boston. I'm guessing that some of our listeners. listeners of the show are also longtime Reddit users like me. There are probably also some folks who are part of the 300 million plus folks who come to you weekly. For folks that do not know Reddit very well, how'd you describe it to them? Oh, starting with the hard questions. Okay. So kind of depending on what I sense their context is, I explain Reddit in a couple of ways. If I was explaining it from the ground up, I'd say Reddit is communities. And so there's communities can be about anything and everything, every interest, passion, hobby, whatever you're into, whatever

you're going through, it's on Reddit somewhere. And then what I would say is, look, if you're pretty much between the age of like 17 and 70, you know, whether you're a nerd or normie, you have a home on Reddit. There's something there for literally everybody. Other times I explain it in contrast to social media. Social media is powered by algorithms. Reddit's powered by people. So every piece of content that becomes popular on Reddit is made popular by people voting and voting in the context of a community.

Users can make things popular, but they can also disappear things. And so by definition, polarizing content doesn't do as well on Reddit. And so what you get as a result is Reddit is the most human place on the Internet because it's powered by people. And if you look at the conversations on Reddit, everybody has comments. But if you look at the comments on Reddit, if you look at the object of the sentences, you'll see that they're talking to each other about whatever. it is, as opposed to social media where they're often talking kind of at, but past the poster. They're either super effusive or maybe the opposite, but there's kind of a lack of connection there. On Reddit, it's people organized around things they love, talking about those things

like real human beings. You were one of the co-founders of Reddit, and you launched it back in 2005. You sold it. You worked on other projects, came back as CEO, I think back in 2015. You've now successfully brought it public, and you've had a couple really strong quarters so far. What's that process been like for you and what's it been like to see the platform grow into what it has so far? Yeah. So look, in 10 seconds there, you basically just described my entire adult life. It's been a 19-year journey. So if I were to kind of hit the high points, yeah, when we started Reddit, it was 2005. The internet was a different place. Social media didn't exist. The platforms didn't exist, let alone the word.

The word influencer certainly didn't exist. So we're kind of born of the open internet. Extensively, we were starting a business. It really was more of a passion project or a labor of love, or really we were just building what would be fun and interesting for us. And that was kind of the first era of Reddit, the first five years. Then I left for five years. I worked on a different company.

I came back to Reddit with a new mentality. that this thing is special. I didn't realize that at first. I mean, I loved it, but it was the only thing I ever worked on. And so I didn't really realize, I didn't appreciate how special something like Reddit was. It brought out, I think, in many ways, the best of people, or this, at least like a different side of people, really empowered people, kind of grew on its own. And while I was gone, Reddit went through some challenging times. I thought if Reddit doesn't survive, that would be a real, I mean, not even doesn't survive.

If Reddit doesn't live up to its potential, that would be a huge missed opportunity. And there's a risk that it might not even survive. So that was kind of the mentality or the thinking I had when I came back to the company. And so the last, I've been back nine years, the last nine years have really been trying to realize that potential. It's been a journey of the company growing up, us understanding the platform better and better. Sometimes I think of our job, not as product people. It's more like we're anthropologists, like studying this living organism and trying to be the best stewards of it as possible and then realizing its potential, both as a platform and then also as a business. And the business side of Reddit is really starting to mature as well.

Yeah, where do you guys think you are in the grand scheme of Reddit's potential? I guess you can take that in the platform direction, you can take that in the business direction, wherever you want to go with that. It's such an interesting idea to contemplate, because on one hand, Reddit has been bigger than I ever thought it would be since August 2005. By some measure, we're big now, right? We have about 90 million people visit Reddit every day, 360 million people visit Reddit every week. So that's big in terms of absolute numbers. But social media, you know, the biggest platforms there have a billion, two billion users every day. So there is, I think, huge opportunity there.

Reddit, we're about 50-50 US versus non-US. I'd say other major platforms are more like 80 to 90% non-US. So I think a lot of opportunity to grow more users. And then on the business side, I think we've gotten out of the beginning phase. We're in the ads business. That's our primary business model. We license data and we do some other stuff as well. We're primarily ads.

It's growing. In the last quarter reported 50% growth, a little more of 50% growth. So that's great. Our ads are working. Our customers are happy. We're continuing to deepen relationships there. But I still think, and so on one hand, we IPOed in March. And so on one hand, it feels like, okay, we've gotten to a certain level of stability and scale where this feels real and it's working. On the other hand, it almost feels like we're at the very beginning. I have a lot of the same feelings today as I did almost 20 years ago, which, you know, which is, gosh, we've barely scratched the surface of this thing. And it can be so special. And I think really, really great on the platform side and the business side. And so I'm really two minds about it. The Jeff Bezos idea of day one is really something I feel like we're living right now.

It feels like the beginning. Kind of taking a step back on the business as a whole, we talked through some of the different components of it. Recent quarter, losses started to narrow for you guys. You have a very high margin business at core. when you look at the gross margins, what does the path to profitability look like for you guys? And is that a near-term priority? Or are you happy with what you're seeing and you want to be able to continue to invest in the business,

even if it means running at a little bit of a loss? I like the progress we've made. Last couple of quarters, we've been profitable on an adjusted EBITA basis. We've been positive cash flow the last couple of quarters. And so kind of the next milestone for us is gap profitability. And we're getting closer to that. So it's an important milestone. We're also a growth company.

One of the most important levers for us for the last couple of years is we've been very disciplined on headcount growth. Our costs, Reddit, it's like the simplest business you'll ever see. Ad revenue comes in. We're 89% gross margin last quarter. We basically spend money on two things, computers and people. and if we're disciplined about how many people we have, we can control costs that way. And so our management goal has been to grow revenue twice as fast as costs. Now we've been able to do quite a bit better than that the last couple of quarters.

And so we're getting closer and closer to gap profitability. I wouldn't say it's a direct goal for Reddit on any particular timeline. But I do think it's important to get there. It's a sign, I think, of a healthy, sustainable business, something. we've been working towards for a long time. But Reddit's business model is truly advantaged. We basically have no CAPEX on top of that. So if we can continue to grow users and grow revenue and be disciplined about headcount,

I think we're in a great shape. And I think it puts us in a business point of view, a unique position in the market. So here at the Fool, we're long-term buy-and-hold investors. We're typically looking at businesses with a five-plus year time horizon. I'm curious with that setup for a multi-year outlook, what type of thing would you like to be graded on? Or what would you want the rubric to be for Reddit itself and for yourself as CEO? When we set goals internally at Reddit, I like to use both words and numbers. The numbers aren't important.

I mean, I'll tell you what the numbers are. We want to grow users, DAU. We want to go revenue, dollars. But not all users are the same. There's social media stuff we could do to grow that we've not done. Not all dollars are the same. So you kind of get into short-term, long-term, sustainable or not. And so the answer is in our mission.

Community belonging and empowerment for everyone in the world. If you speak English, everybody has a home on Reddit. So can we grow users in English by making the product better, by making onboarding more effective? And then can we grow outside of English using machine translation and some of our program work? And on the revenue side, we like having direct relationship with advertisers, and we try to make our ads more and more relevant, more and more effective for the advertiser. So you should grade us on users. You should grade us on revenue. There's all sorts of input metrics that we don't necessarily report, but things that I think about are new user retention.

What we call our good visits. Like when a user visits Reddit, we call it a good visit. If they find a post, they spend more than 30 seconds off. Headcount is another one we report. So hopefully you see high revenue growth, good user growth. You see us building products in harmony with Reddit and its mission, and disciplined headcount growth. Those would be the things that I would watch. To wrap us up here on Reddit, you are Spez.

And for folks that haven't used it and want to check it out, what's a subreddit community that you think they should check out to get a good feel for what Reddit is at its best? When I demo Reddit, and this is what I do for investors a lot. broadly speaking, our investors can and should be users. And of course, the inverse is something I was very excited about for our users to be investors. That's one of the reasons we went public. When I'm showing somebody Reddit for the first time or talking about Reddit for the first time, I often just pull it up.

And so I show them Ask Reddit. Because on Ask Reddit, you'll see people asking all these kind of funny or interesting questions. Like a typical Ask Reddit post might be, like, what's your funniest memory from elementary school? And then you'll have thousands of people telling stories. they've probably literally never told before. And that's one post out of thousands every day. So I do ask Reddit. I often pull up science, just so you can see like a serious side of Reddit.

I'll show them Dadit. So Dadit is a subreddit for like dads. I have a couple of kids. And so what I like about Dadit is you usually see like a funny post next to like a serious post asking for advice. Maybe next to like a profound post, right? Somebody grieving something very difficult that's happened. or trying to, you know, relationship challenges as a result of having kids, things like that. Like really stuff that you wouldn't talk about on social media.

And then similarly, I might pull up like Photoshop request, which is a subreddit where people pay $5 to $10 to alter photographs. But again, you can pull it up almost any time. You'll see something funny. You'll see something that'll make you cry. You'll see something sentimental. And it really, I think, captures this idea that this is how humans are, that they spend their free time. with no other incentive than like it feels good, supporting each other, helping each other, sharing a few laughs,

like just going through life's journey together. I think that's really incredible. And I think it's not a Reddit thing. It's a people thing that Reddit, I think, uniquely reveals. You know, Steve, I have to thank Photoshop request for the birthday gift I gave my father last year because I had found a picture of his father at a store that he ran when, when he was younger. And there was a famous person who had come and visited the store, and it was this great picture, but there were like all these random people in it. And I wanted

to just give a photo of my grandfather and this NFL player. And sure enough, the Photoshop request community delivered. And I wound up being a great son for my father's birthday. And it cost me, I believe, $10 to deliver this all-dictic. Yeah. Yeah. That's what it's all about. That's super cool. Listeners, that was just a portion of my conversation with Steve Huffman. We'll be airing the longer form interview where we dive into the company's ad business, his thoughts on AI, and how Reddit prepared to go public this weekend over in our podcast feed. You can catch that and our daily Motleyful Money episodes wherever you listen to podcasts.

Coming up after the break, Asset and Ron return with a couple stocks on their radar. Stay right here. You're listening to Motleful Money. As always, people in the program may have interested. in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy or sell anything based solely on what you hear. I'm Dylan Lewis, joined again by Mountain Fool analysts, Asa Sharma, and Ron Gross. Ron, we were talking Olive Garden earlier in the show. In addition to the earnings update, you mentioned the company is bringing back an all-time crowd-pleaser and cult classic.

It's never-ending postable for $14, looking to get diners back in with some deals. My question to you, Is this a deal? I know that people love it, but can you really eat more than one bowl of pasta on? You're asking me? First, I have something to say. The stock's up on the Uber Eats deal, but as far as I know, you can't eat all you can eat pasta or never-ending breadsticks via Uber eats. I don't think they're going to keep going back and forth for you. So the two things a little bit negate each other. But if you give me a good meat sauce on a good bowl of pasta, I go back two, three times, absolutely. Maybe Uber Eats will anticipate that second bowl of pasta

and just put it in there for you so that they know it's waiting. Awesome, what do you think? Do you really have two bowls of pasta in you? Yeah, I'm great at rationalizing, so I tell myself I can go for a second, I can go for a third. I'm taking a run tomorrow, and I never take the run. So, yeah, I can handle more than one bowl of pasta. Maybe you guys are just more active than me.

Maybe that's what it is. Maybe not. All right, let's get over to stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Ron, you're up first. What are you looking at this week? You know, Dan, as I look for beneficiaries of lower interest rates, D.R. Horton, D.Harton, D.H.I, caught my eye. They're the leading home builder in the industry over the past 22 years, a presence in 121 different metro markets spread across 33 states,

concentrating on providing entry-level home opportunities for buyers. They also build and sell single-family rental and multi-fifference. family rental properties. They become the number one builder in over 50 major markets across the nation, including Houston, Austin, Dallas, Fort Worth. So it has been a good focus on the South, because the demographic trends kind of work nicely with people moving towards that direction. So it's paid off nicely. They're responsible for nearly 14% now of all single family new home sales nationwide. So I think as interest rates come down, as people come back into the housing market, demand improves, I really think the fact that they're focused on houses at $400,000 or less

in many circumstances, they'll really be the beneficiary of it. And their metrics are great, 17% return on assets over long periods of time, 22% return on equity. So I think this really looks like a good one, especially for this macroeconomic environment. Dan, a question about D.R. Horton, ticker D-H-I. Yeah, sure. Ron, what's our time horizon on returns here? Because if I know one thing about building houses, and I really do only know one thing about building houses, is that it takes a while. It does take a while.

There are plenty of homes in certain pockets, but we need many more homes. It's a demand supply imbalance, which is why prices are out of whack. So it will take some time, but you're only paying 12 times earnings here, Dan, so you can wait. All right, Asoe. What is on your radar this week? Well, Dylan, I'm a sucker for a turnaround story, especially the kind that people wouldn't touch with a 10-foot pole, and that would be Intel among major companies in the semiconductor industry. This stock has struggled because Intel is having trouble expanding its manufacturing

business. It wants to get back into the business of making specialized chips on a big scale, but it's having trouble lending a Marquis customer. That foundry business, which is the name for this manufacturing business, is killing the financial statements just last. quarter, this segment lost $2.8 billion, but Intel's been slashing costs. It's been pulling back from some of its more ambitious expansion plans, such as opening a new manufacturing plant in Germany. And the U.S. government just confirmed that it's going to fund another $3 billion for Intel to work on its domestic manufacturing plants in states like Arizona and New Mexico. Finally, it finally got that Marquee customer. This week, Intel announced that it's going to get

further into a partnership with Amazon. The companies are going to co-invest in new chip designs. So, Intel will produce some artificial intelligence chips for Amazon Web Services using both its own technology and Amazon's technology. So I think this has the beginnings of finally, a company that has had trouble turning around, looking better as we go out. And I will give you a timeframe three to five years. Dan, a question about Intel. It feels like we talk about chips and chipmakers all the time here on this show. I don't know. Asset, I feel like Intel's got an uphill battle here. You're right. They do. We should throw some cold water on this. Be careful. If you want to follow my lead into the stock, watch your position size. Dan, D.R. Horton going on your

watch list? Absolutely. Asit Ron. Thanks for your stocks. That's going to do it for today's Motleyful Money Radio Show. Show's mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see you next time.