Motley Fool Money - S&P 500: New Highs, Same Valuation Questions

Episode Date: January 24, 2025

At new all-time highs, the market’s valuation concerns aren’t going away anytime soon. But they’re also not keeping big money from being committed to artificial intelligence. (00:44) Jason Moser and Asit Sharma discuss: - The S&P 500s new highs, what to make of the market’s valuation and what some of the big names on The Street have to say about it. - Stargate, the new $500B planned joint venture between OpenAI, Softbank, and some of the biggest names in tech. - Fantastic earnings reports from Netflix, GE Aerospace, and Twilio. (19:03) Tim Beyers talks with Frances Schwiep, a partner at Two Sigma Ventures, about where the biggest early-stage opportunities are right now in the AI ecosystem and what to look for in great founders. AI Summit interview with Frances Schwiep: https://www.fool.com/premium/4056/coverage/2025/01/15/ai-summit-2025-interview-with-frances-schwiep (32:30) Asit and Jason check in on their new year’s resolutions and offer up two stocks on their radar: Nike and Garmin. Stocks discussed: MSFT, NVDA, ORCL, NFLX, GE, TWLO, NKE, GRMN Host: Dylan Lewis Guests: Asit Sharma, Jason Moser, Tim Beyers, Frances Schweip Engineers: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed sponsored jobs to find the right people with the right skills fast. It's a simple way to make sure your listing is the first candidate C. According to Indeed data, sponsor jobs have four times more applicants than non-sponsored jobs. So go build your dream team today with Indeed. Get a $75 sponsor job credit at Indeed.com slash podcast. Terms and conditions apply.

Valuations to the moon. AI to the stars. This week's Motley Full Money radio show starts now. That's why they call it money. Cool global headquarters. This is Motley Fool Money Radio show. It's the Motleyful Money Radio show. I'm Dylan Lewis. Joining me over the Airwaves, Motley Fool senior analyst Jason Moser and Asset Charma. Fools, great to have you both here. Hey, hey, good to be here. We're checking in on the market start to 2025 this week. We're also going to be looking at three stocks, soaring after earnings, and getting a sense of the next wave of early AI investment. But we are going to start out tackling where the market is at.

Jason, the S&P 500 hitting fresh all-time highs this week as the market processes the new year and the new administration here in the United States. Yes, and there are certainly some concerns there that the market is maybe a little overvalued or valuations are getting a little frothy. We saw over the week Jamie Diamond, CEO at J.P. Morgan, he noted that asset prices or, as he said, kind of inflated. He noted they are in the top 10 or 15% of historical valuation, which is fair. Now, you also have to kind of ask yourself, why is that the case? I thought it was interesting to see Stanley Drucken Miller this week. He noted, he said he's been doing this for 49 years, right,

managing money and picking stocks. And he said that it feels like we're going from the most anti-business administration to the opposite. So I'm not saying whether that's the case or not, but at least that's the perception out there. And he did also note that they talk to a lot of CEOs, they get a lot of boots on the ground research. And he said that CEOs are somewhere between, and these are the words he used, relieved and giddy. So, yeah, I mean, maybe the market is a little bit overvalued there,

but it does seem like it's at least for understandable reasons. The Wall Street Journal had a piece out this week talking about the valuations of the market on a Schiller PE basis that the various administrations have inherited as they've come into office. And Trump's second administration inheriting the highest market valuation that we have seen, some of that, I think, is a product of so much money flowing into the markets, Osset. And in particular, we're seeing a widening out of the retail investor base in the United States and also kind of globally a lot more money coming into the U.S. Dylan, the last few years have been very good to U.S. investors or those who invest in the U.S. stock

markets. Cumulatively, you're looking at 53% points of returns in just the last two years. So that success is attracting a lot of capital. And you throw in some of the macro picture, the promise of productivity from AI, an administration that looks like it'll be friendlier to businesses, which will hopefully in turn increase earnings power, which is one way an expensive market It can get not as expensive. I think there's a general sense that things could go well here. But, you know, on the other hand, I wonder, as you point out, the Schiller PE ratio seems to hand this weird kind of gift to every administration, which is you're probably going to see the markets go down on your watch, right? I wonder what will happen here.

We've got two-thirds of the total global capitalization just concentrated in U.S. markets. And the U.S. has about 26 percent, I say only, of world GDP. it almost feels like we're due on a few fronts for a little bit of reckoning in valuations, especially as they've been pushed higher by big tech companies. So it's maybe six of one, half a dozen of the other. You know, try to putting everything in context when we talk about valuations and where they stand. I mean, if you look at the S&P right now, the market is valued. It's somewhere around 30 times trailing earnings and around 23 times full year 2025.

estimates. Now, obviously, we just started 2025, but that I think sort of shows you some of the enthusiasm there. And then some listeners may be familiar with that old rule of 20, right? When you sort of, you take the sum of the PE ratio and the inflation rate. Ultimately, 20 is kind of the benchmark there. Anything above 20, you start looking at it stretched valuations and anything below 20 looks like a little bit more of an attractive valuation. I mean, clearly, right now, Given those numbers I just gave you, that rule of 20 is being broken. Hey, listen, as investors, we're happy. But it is, again, I think it gives you some context just to kind of why we have these conversations

on potential overvaluation in the market. Valuations not getting in the way of where some big money is being committed, particularly in the AI space this week. A new $500 billion joint venture Stargate announced by Open AI in news headlines this week. I said, and this brings together this joint venture, kind of an odd super friends of U.S. tech companies. The Hall of Justice.

Right. So we've got Open AI CEO Sam Altman sort of shepherding this project or bring it together. He brings his friend Masayoshi-San the very peculiar, sometimes extremely successful and sometimes not global venture capitalist. We have players like MGX. which is the United Arab Emirates, sovereign investment arm. They're going to be investors in here. Then we've got companies that are maybe more familiar to us.

Oracle is going to participate, and VDivio will participate. Microsoft is going to participate on some level. But really the equity funding is going to come from two sources, OpenAI and SoftBank. Together, from the details we're getting, own a good portion of this project. We're looking at so many data centers. It could be 20 to 30 data centers. to be built in the U.S. over the next five years out of this $500 billion, and a lot of money spent on GPUs.

Now, we should say this has attracted a lot of snark from one Elon Musk, who is not great friends with Sam Altman. Satina Della from Microsoft said, hey, we're good for $80 billion of CAPEX this year. And Mark Zuckerberg got into the act today as we're taping to say, hey, look, we're going to up our spend over at Meta to $60 billion of CAPX this year, whether we're part of this project formally or not. So, details are still to be nailed down, but it is interesting. I think it's also indicative of just the race to invest in AI.

That part of the fervor and hype hasn't died down in 2025. A lot of the names that you mentioned there, Microsoft, Nvidia, many of the leaders at those companies, very familiar to folks that have been following the AI space. I think Oracle came up, and that is a name that we have not talked about nearly as much, and probably to our detriment. because over the last one, three, five years, the stock has performed incredibly well. AI has been a part of that story. What do you make of them coming into the mix here? You know, Oracle has very quietly taken its licks. They very famously avoided the cloud

and thought it wasn't going to be a great deal and then watched as Amazon Web Services and Microsoft Azure ate their lunch. Credit to Safra Katz, the CEO and Larry Ellison, the chairman, who decided to just build a new architecture from scratch, it turns out to be really conducive to running AI cheaply. So all these startups and other companies, enterprise businesses, governments, academic research institutions are finding that if they run their AI on Oracle servers, they actually get a pretty good return for their money. So they've partnered up with a lot of companies and they are plowing money to build more data centers themselves.

They're taking their learnings from missing the big cloud explosion and reinventing how they're is service the cloud from scratch is paying off so nicely for them. And they've flown under the radar, as you point out, pretty hard to do when you're a mega cap company like Oracle, but somehow they pulled it off. They've certainly caught investors' attention now. It reminds me a little bit of the great Microsoft revival that has happened over the last 10 to 15 years, where humongous tech company that I think had a legacy reputation for a lot of investors and then found that next wave. In their case, the productivity, cloud software, and the cloud segment overall, maybe there's some more juice here for Oracle going forward.

Could be. And I think that we should look at how aggressively they've invested in their infrastructure and how aggressively they intend to invest going forward. It matches some of the skill we're seeing out of meta and Microsoft and Amazon. The companies we associate with not holding back when they write check. So Oracle has joined that club. Let's see what they do in the next few years. All right. Coming up after the break, Netflix hits it out of the park with its earnings. Where's the next chapter of its big growth coming from? Stay right here. This is a Motleyful Money.

Welcome back to Motleyful Money. I'm Dylan Lewis here on air with Asa Charma and Jason Moser. Earning season is fully underway. And Netflix stealing a lot of headlines this week after their report. Jason, the streamer reminding everyone, hey, we are number one. We are King of the Castle when it comes to streaming. Yeah, stealing headlines for good reason. I mean, it was just another really impressive quarter.

Not that I think we should be surprised, but, I mean, adding somewhere in their neighborhood of 19 million additional subscribers, very, very impressive. And I thought, interestingly enough, they noted in the call, too, that it's not like most of those subscribers came from folks looking to be able to watch the football games over the holiday season or necessarily to log in to watch WW. I mean, to be sure, they helped, but that wasn't what drove it. And I think that's really what's so impressive of this business.

They've just done such a good job over the years, building out a couple of content library that just got something for everyone. And so now over 300 million seemingly very happy subscribers. To me, I thought the revenue growth, 16% was impressive. I thought to me even more impressive, though, to see operating margin was up 5.3 percentage points from the same quarter of a year ago. I mean, this is a company that now is really starting to extract some profitability from the model. And there's no reason why that really should. shouldn't continue. Shareholders certainly happy to see that the streamer is also planning on increasing prices, maybe sling that the subscribers aren't quite as happy about. Asit, we have seen them continue

to hike prices and also introduce ad-supported streaming like a lot of other streamers have. What do you think of the interplay between these two business lines and what's going on with their overall pricing models? Yeah, I think when you have a product that people feel that they just can't do without you can take pricing, and that's what they're doing. Being able to shift some consumers downstream to add-supported tiers is good for Netflix. And they're taking so much of their CAP-X and building a really phenomenal monetization engine. So the ad tech that underlies their revenue is very strong. And they're rolling it out country by country. So it's fine-tuned for Canada, is something we heard about this quarter. Now they have their own native tech stack there.

They're going to do this country by country just to target local users. So you get this virtuous cycle where you maybe get priced out of the full tier. You're content to watch the supported tier. And as they show, they have sort of phenomenal uptake of the ad-supported tier. We don't know the exact dollar figures from that. And in doing that, they're able to throw some snark at other companies. I love the way only Netflix can subtly take jabs at its competitors. they talked about in their press release being such a pure company, only focused on streaming,

not having to deal with the distractions of a-link linear network like Disney and some other competitors. So, yeah, just very focused, core business doing well, that ad business is also meaningful. And I hope to see the breakout of that revenue at some point in the near future. Yeah, I think as it stands right now, we have to do a little sleuthing to figure out what's going on with that ad business. What I saw, Jason, was ad revenue doubled in 2024. and that the management team expects it to continue to be growing at a pretty fast clip. We're not getting that breakout that we'd love as investors, but in your mind, how are you valuing what's going on there,

the growth that you're going to be seeing there when it contributes to the business versus the core membership model that we all know and generally love? Yeah, I'm not sure that we should expect them to get too terribly granular with it. I mean, remember, they are actually going to stop giving us even subscriber forecast numbers. So they'll give us numbers when they hit certain milestones, but we're going to even get a little bit less information there. But I think going back to just the success from the quarter, I mean, they noted that the advertising strategy continues to take hold. It accounted for over 55% of signups in ad supported countries. And then ads plan memberships grew nearly 30% from a quarter ago.

So I think that what they're doing is they went into this with some thought. and they understood that advertising supported video on demand is something out there that consumers want. Netflix felt like they could participate. And so they built this out in, I think, a thoughtful way to make sure that they were doing something that they thought those subscribers would love. And so as they continue to raise these prices, sure, I mean, some people are going to balk at it, but for the most part, we're not, right? And for the people that do balk at it, instead of necessarily quitting Netflix, maybe now they just have an option to down. to an ad supportive membership until they decide to re-upgrade again. Also, soaring this week, GE Aerospace shares up almost 10% largely on earnings.

But, Asa, this feels like a little bit of a mix of what the company put out and some excitement around that and the general excitement around the business of space right now in the market. I think you're right, Dylan. I mean, we're always hearing about companies that are on the cutting edge of space innovation, but there's been a bit of space innovation. But there's been more focus recently on companies that supply just mission critical stuff in the aerospace industry. GE Aerospace is a supplier of high-performance jet engines. And so they're starting to get some love from investors. They can't produce fast enough to meet their demand, which is the situation of a lot of

aerospace businesses just now. Total orders this quarter were $15.5 billion. That's up 46% year over year. And what I love about GE Aerospace is it's got this amazing spare parts business, service business. I liken that to sort of the razor and blades model. If the jet engines are the razors, then all these spare parts and shop visits for repairs are the blades. This is a company that benefits from this backlog of airplanes that need to be manufactured. We have to keep some tens of thousands of jet engines flying in the air all the time, and GE only gets better.

by that service revenue. So a very interesting quarter on all fronts, and they've got a little defense business on the side that grew pretty well, 22% year-over-year itself. So for people watching that industry, Aoset, would you say that GE Aerospace is maybe one of the more kind of diversified, stable players as folks are looking out and seeing other companies like Rocket Labs, intuitive machines, and some of the more, I don't know to say speculative, but more kind of future-oriented businesses? Yes, totally. Because GE is focused on the Aero space industry, whereas some of these other companies like Intuitive Machines, which is very interesting technology, and it's now getting into the communications

business, satellite communications business, they're focused more on the space part of the industry. So I like to just make buckets of the two. And when you have solid players like this, you can start to build a basket. If you follow the industry, there are some great spare parts suppliers like Transdime and HACO, you can work in a little bit of the space-space companies as well. So, all across the range of this industry, as you point out, Dylan, there's much interest right now. But I like some of these core companies to build sort of a basket around. All right. From the skies, back down to ground control. Cloud Communications Company, Twilio,

out with some fresh earnings results on Friday. Jason, shares up 20 percent, rounding us out with another heavily followed full stock that seems to be having a pretty good week. Yeah, I think this is a good example of leadership, just doing what they say they're going to do. And this is a company we talked a lot about on the show. It was radar stock back in July of last year. I said, to me, it felt like there would be a time where the market's a bit more tolerant of companies like these. And if Kozama's Ship Chandler keeps doing what he's doing, I think patients could pay off. The stock was in the $55, $60 range at that point.

So I think we kind of see how that has worked out for investment. but they said a lot of really good things on this analyst day presentation, returning back to that double-digit growth that we've all expected, actually reporting their first gap profitable quarter in Q4 and set the expectation that for every year here on out, you should expect that this is a gap profitable company, and they continue to bring that stock-based compensation number down as well. So just operating with a lot of rigor and pursuing a lot of growth opportunities,

reigniting that growth. It's certainly understandable, the enthusiasm. enthusiasm in the stock today. Jason, this was a growth stock, and at one point, I think, had to go through the doldrums like so many others did post-2020? Where do you see kind of the expectations of the return profile for business like this going forward? Yeah, I think things are starting to look a lot more encouraging. Again, maybe it required a leadership change. A lot of that kind of came from its old startup mentality with Jeff Lawson, the co-founder of the business, and now Kazama, the Ship Chandler taking over, and he has a bit more of an operational focus. But I think, generally speaking,

what they're doing, obviously it's working and pursuing a very large market opportunity. All right, Jason Asset, we're going to see you guys a little bit later in the show. Up next, we've got to look at where the next wave of AI upstarts are focused. Stay right here. You're listening. It's a motley full money.

These days, I'm all about quality over quantity, especially in my closet. If it's not well-made and versatile, it's just not worth it. That's honestly why I love quince. The fabrics feel elevated, the cuts are thoughtful, and the pricing actually makes sense. Quince makes high-quality wardrobe staples using premium fabrics

like 100% European linen, silk and organic cotton poplin. They work directly with safe ethical factories and cut out the middlemen so you aren't paying for brand markups or fancy stores, just quality clothing. Everything they make is built to hold up season after season and is consistently rated 4.5 to 5 stars by thousands of real people like me who wear their clothes every day. The Quince, Mongolian, Kashmir Kru Neck sweater, may be the most comfortable one that I own.

It's light, soft, and it was a lot more affordable than you think quality cashmere would be. Stop waiting to build a wardrobe you actually want. Right now, go to quince.com slash motley for free shipping and 365-day returns. That's a full year to wear it and love it, and you will. Now available in Canada, too. Don't keep settling for clothes that don't last.

Go to QINCE.com slash motley for free shipping and 365-day returns. Quince.com slash motley. Welcome back to Motley Full Money. I'm Dylan Lewis. We spend most of our time talking stocks and the public markets here on the show. But the reality is that some of tomorrow's most interesting tech stocks exist today as early-stage venture companies. So to get the skinny on the cutting edge of tech and where new venture funding is going, especially in places like AI, my colleague Tim Byers caught up with Francis Schwep.

She's a partner at Two Sigma Ventures. It's an early-stage venture fund. There, she spends most of her time looking at companies that have a digital. data focus and leverage AI and machine learning technologies. Tim and Francis talked about where the biggest early stage opportunities are right now in the AI ecosystem and what to look for in great founders. I'm very curious. What kind of view have you developed around AI and ML right now? I assume it's changed and it's probably changing all of the time.

But when you look at that industry and the view that you have, what do you? you see? Right now, I think the biggest opportunity is in the underlying tools that are going to be made available to application developers who are looking to build AI applications. So there's this kind of, and I think we're ending sort of in the next year is, we'll be the maybe closed to the most exciting tools that are available. And I think we're going to see the start of a real like ROI heavy agenic workflows where you really have AI agents completing specific tasks. And so, and maybe I'll just also say, you know, the first part of this wave was obviously a lot of the foundational models. So the anthropics, the coheres, the open AIs of the world, that is at this

point, I think, mostly baked out. And it's also a very capital intensive and late stage game. So it's not where we focus at the moment. But, On the like agenic workflows, I can go into that. I mean, I think I have a view on what makes AI agent tooling very powerful. And the areas in which it can really have a lasting impact and maybe are kind of like most right for it to disrupt. So my view is right now we are in the tooling and stack, AI stack build out. Like I said, that involves a lot of things like, you know, AI safety tools, data quality monitor. automating,

and so, you know, things like auto GPT and LangChain. All of that I put in the tooling set, and now we're just starting to see exciting, true AI applications that are not just being tested in the experimental budgets of the enterprise, but they're actually being used in the day-to-day workflows of those employees and individuals. Let's talk a little bit about just 2024,

obviously the year of the GPU, this has made some investors, Absolute fortunes. Do you think, and I think you touched on this briefly, is 2025 a bit more of the same? Or do you have, we sometimes like to make reckless predictions here at the Fool? Do you have a reckless prediction about what will be the technology? It's like, this is, you know, 2024 year of the GPU.

2025, the Francis Schwepp reckless prediction is the year of what? Oh, man. I don't know those. I do think agentic work. plus is going to be big. I think that's what we'll see in 2025. Although, you know, Nvidia made these big announcements recently. I'm sure you saw. I think the most exciting one was the Jensen-ORI platforming computer, which is just a significant leap forward and edge AI. And I think maybe the reckless prediction around that is I think we will see the fast acceleration in AI-enabled

hardware than we've ever seen in the history of venture investing. And that is because, because that computer has made, you know, being able to compute AI at the edge not only possible from the size of the models that we're talking about these days, there's something almost like 300, 270 something. Trillions of operations per second is what that new computer can handle. So just like massive AI workloads. And then this incredibly energy efficient was something I used to work at an wearable computing company, as you mentioned, was working a product there. man, like being able to get the battery life or just like being able to actually run those models on device sucked up a ton of energy. I think this is groundbreaking from that perspective. It's a small form factor.

So you can talk about different sizes of hardware, whether from robotics to drones to, you know, whatever IoT, future IoT, hardware's you can dream up to autonomous vehicles. We invested in a company that is autonomous, basically like the autonomous caterpillar. And so, you know, that's a big one. I think, again, stuff like what NVIDIA is releasing around edge AI is going to be huge for the break open of that market. That's, I don't know if it'll be 2025, I think, to be honest, the 2025 will be the companies building the hardware around this new computing technology.

And I think in the next year is when you'll start to see those companies pop up. And then I imagine a lot of 2025 will be focused on agenda workflows. The beginning of AI everywhere. every device. So that's, that's. Yeah, we've been waiting for it. But now we actually have, yeah. It does, it does seem like it's coming. I want to come back to the beginning of your career. You started your career as a data scientist. So you have a very rigorous background. Seeing the world in, in very analytical ways. Because you're a venture capitalist, there is some art. And you touched on this that comes into the process. How much of the investing process is art and how much of it is science?

do you think? And I'm talking about it specifically from your perspective, but you could take it as general as you want. I'm going to say 80-20 science art. And I think the scientific part of it, I like to say I take a scientific approach to investing, which is you have a thesis. And then my job is to kind of like disprove the null and go through the steps of diligence to get myself over the line on this being a good risk-adjusted return profile for an investment. You know, we like to say we look, though, for the glimmer of greatness, which is more of the art part of this. I think it has more to do with, like, intuition.

And I think it's possible that the 20% is even more important. I think there is a lot that goes into, you know, if you suspend disbelief, like there may be no market for the technology today. There might not be a single customer using it today, and maybe there's a lot of skepticism. But on the chance that it becomes great, you know, and there's like, it becomes the, it's the power law dynamic. And you could say this about Airbnb. There was no market for the Airbnbs. We're starting the business, and it sounded crazy.

But on the off chance it worked, you know, there's a huge glimmer of greatness there. That's the creative piece of it. Is that intuition? It's that kind of like trying to peer around. the curve and suspend disbelief and dream a little bit with the founder. And then I think there's also creative ways to get to an investment, which might require, you know, spending time with the founders. Like, you know, we talked about the magic of human connection and what you see that sort of lights someone up. They're the, what sparks your imagination and sparks the imagination of the founder

to be dedicating their lives to building this new technology. That is something that I think requires more human connection and less science. Yeah. Quick follow up on this one. And then a final question looking forward. Can you name a founder? Doesn't matter to the company, but a founder that you've either observed or interacted with directly

who has that glimmer of greatness. Who stands out to you? You know, somebody that we know who's got it? I think Will, who's the founder of Woop, It's one of our investments. He is relentless about how he tests and iterates on the product and how much focus he drives for the business. I think one of the biggest mistakes founders make is they start to lose focus.

And a lot of people did not believe in him. He was like, I'm focusing on, I don't know if you use a whoop before, but I'm wearing one. It tracks your athletic performance, your sleep performance, and he's obsessed with performance. It's like not a step tracker. It's not a just say, you know, it's not like a wellness app. It's for true athletes that like, you know, want to track their performance.

And people try to push them in a lot of different directions. Like you need to add steps. You need to focus more on like nutrition and add these other things. And he's like, no, we're going to get as fine-tunedly good at performance as possible. I mean, I think you saw this with the founders of Google. They're like, you know, we're going to focus on the milliseconds. of getting you the retrieved answer from the search query. And he's like that when it comes to tweaking the performance metrics.

And so when you wear a whoop and you use the application, you get very highly tuned and precise data about your body and your performance from your muscle activity to your hitting your VO2 maxes, what zone you're in when you're training and pushing it on a treadmill or lifting weights. you know, where you are in your sleep in terms of REM and restorative sleep, things like that, that he drills in and double clicks into that product. And then he has built a very loyal

and motivated team behind him in Boston. And we actually had the new CTO come and speak at one of our meetings recently. And she is just incredibly inspiring and actually recently led to the release of an AI bot where you can ask questions. I recently asked my whoop, how many minutes does it take for me to fall asleep? And it said, you know, something like 65, which is too long. We spend like 45 of those stressing about the next day or something. But it's amazing. There's like AI chatbot about, because they have such good data

and they focus so much on metrics and so much on the data they were collecting. Now they're able to layer on this, you know, AI agent, basically, that can be your, you know, your health coach. And you can ask questions of this very rich data source that, and data asset that they've built up over time. So I think I have a lot of respect for him as a leader, as a product builder, and as someone who knows how to focus and make the right tradeoffs.

Relentless focus and right tradeoffs. Yeah. Okay. Great. Let's end on this. Imagine that I am pitching you a business idea. And I'm coming into the meeting and you're going to give me a piece of advice before I come into the meeting.

What is your piece of advice for me so that I come into the meeting and have a hopefully successful meeting with you and your partners. I think the biggest one is tell me why people need your product and why you have to build it. Like you can't buy or hire your way into product market fit. And I think, you know, you have to focus on building a product that users and customers ultimately, like, really want to use. You just can't skip steps.

And so I think I've seen folks, you know, maybe focus prematurely on scaling the company without the killer product first. And so I, maybe that's skews towards my background, which is I, you know, I have more of a product mindset. But I think one is telling me, yeah, it's really just connecting me and helping me understand why this product needs to be built,

and then obviously why you are the one building it, what makes you uniquely capable of building this product. And then, of course, we can get into, you know, market and your business model and all that. But those are the big ones. Listeners, if you're a Motley Fool Premium member, you can catch the full conversation between Tim and Francis on our website.

It was part of our AI Summit for members earlier this month. We'll be sure to drop a link to that for members in the show notes for the podcast version of this week's radio show. show. If you're not a member and you want to join, head over to Fool.com slash sign up to join Stock Advisor. As a Stock Advisor member, you get two new stock picks each month, rankings on the whole scorecard of companies in the service, and access to all episodes of our premium podcast, Stockvizer Roundtable. You can learn more at pool.com slash sign up. We've got Asa Charma and Jason Moser coming back with me in just a second, and they're bringing

some stocks and stories on their radar. Stay right here. You're listening to Mountain Full Money. As always, people on the program may have interests in the stocks they talk about. and The Motley Fool may have formal recommendations for or against. So don't buy something things based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. The Motley Fool only picks products. It did personally recommend a friends like you.

I'm Dylan Lewis back on air with Motley Fool analysts, Asset Sharma and Jason Moser. And Fools, we're here taping in the third full week of January. And by this point, experts at Baylor say that most people have failed their New Year's resolutions. Jason, here at The Fool, we're all about keeping. score. So I have to ask, how are we checking in on the New Year's resolution so far? Well, I love that. And I will say, so you and I spoke before the New Year, and I kind of a two, a one-two punch on the resolution front personally, just trying to wake up every day with a bit

more of a glass, have full view on things. Just tackle the day with a smile. So far, so good, Dylan, it's working. I'm not going to lie. On the back end of that, I said I wanted to add three new companies to my portfolio. And we're going to get to rate our stocks here in just a minute to be continued. Ooh, all right. A little teaser. Awesome, what about you? How's the resolution progress going? It's middling. I mean, I have more than one resolution. So is it 33% rate any good? You're diversified. I noticed in the article that you shared with Jason and I that the folks at Baylor say that 88% of people who set New Year's resolutions fail them within the first two weeks. So I want to meet the other 12% and start hanging with them this year.

You can be part of the 12%. I believe in you. The nice thing about resolutions, you can pick them right back up at any point during the year and keep making progress. And to be serious, that was the point of this article that you can succeed by failing, picking yourself back up, making that incremental progress, which I think is a great principle to hold. All right. Well, let's help Jason make a little progress on his resolutions. Let's get over to stocks on our radar. As always, our man behind the glass, Rick Engdahl is going to hit you with a question. Jason, let's hear what you got for adding stocks to your portfolio. Well, yeah, it's 2025, and I indeed have added one of my targeted three. I bought shares the other week, Dylan, in Nike, ticker NKE. I think everybody knows about this business, right? Tremendous brand equity, obviously the global leader in sports, but they, you know,

Recent blunders by former leadership have created some headwinds. They really worked on prioritizing the digital business over the last several years and sort of neglected their wholesale partners. And so new leadership there, I think, is going to focus on sort of balancing those scales a little bit with new CEO, Elliot Hill. It's understandable why the stock has been taken to the shed. And it has been taken to the shed. I mean, when you see the headwinds that have created, you see the impact that that's out on the bottom line, sales actually decelerating for a company like this. And then they noted in a recent call that over the near term, the effect of the actions that they're taking in order to write the ship will result in lower

revenue, additional gross margin pressure, and higher demand creation expenses. That doesn't paint a very good picture, Dylan, right? And the stock reflects that today. But I do believe that this is a business that will recover. They were self-inflicted wounds that I think they can recover from, a big focus on those wholesale partners going forward. There's a reason why shares are at 22 times earnings today, but I think it'll get back closer to its historical norm in the coming years as new leadership executes a good comeback. All right.

Who doesn't love that? Rick, a question about Nike ticker NKE. I would love that. I'm a long-time Nike shareholder, but not long enough, I'm afraid. So how many years do you say I have to wait to come back from my... Well, my intention, Rick, is. to hold this business until I'm long gone. So I think, you know, patience will pay off here. That 2.2% dividend yield gives us a lot of incentive to just hang in there and watch them do their thing.

All right. I'll hold on. All right. What's on your radar this week? So I'm looking at a stock that was up 69% in the last 12 months. Why would I even do that as a radar stock? Well, it's trading around 28 times forward earnings not too expensive. And the company is Garmin. Now, this is a business that reinvented itself. Years ago, it was known as a GPS company. It's become more of a consumer-facing company with lots of fitness wearables. It also has an outdoor segment, an aviation segment, a marine segment, an auto-original manufacturer segment.

So it's very well diversified as a business. And it just has this way of chugging along very quietly. I mean, this is a business that throws off a lot of free cash flow, operating cash flows. increase every year, almost approaching a billion bucks now for what's a relatively small company. And I just like the way that Garmin has established a brand for itself in the fitness market. I myself have looked over some of their products, including some very snazzy accessories for my bike. Haven't bought them yet, but keeping an eye on them.

Not only a radar stock, but a watch list item for Asset's personal fitness journey. Rick, a question about Garmin, ticker GRMN. This seems like a company that should have died. didn't. Is that because of good leadership? And is that leadership still in place? Yeah, the leadership is still in place. And you're absolutely right. Not just on the executive level, but the whole management team has been together for a while. And they know the drill. They know how to run this diversified business. And they keep the focus on churning out great new products that we see in stores and online. Rick, you go into a company in your portfolio already,

Nike or something new with Garmin? I got enough Nike. I'm going to go with Garmin. These guys turned it around once. I guess I guess I can trust them. There you go. Jason, Asset, appreciate you guys bringing your stocks. Rick, appreciate you weighing in. That's going to do it for this week's Month of Money Radio Show. Show is mixed by Rick Engdahl.

I'm Dylan Lewis. Thanks for listening. We'll see you next time.