Motley Fool Money - Stock of the Summer and Unsung CEOs

Episode Date: May 23, 2025

Memorial Day means mowing the lawn and grilling – while you’re outside we’ve got a company to keep in mind and a few CEOs worth watching. (0:21): Jason Moser and Bill Mann discuss: - What Jony Ive and Sam Altman are cooking up for hardware with OpenAI and io. - MercadoLibre’s founder and CEO Marcos Galperin stepping down, and the unsung CEOs that should be getting more love. - Target’s continued retail woes, and how Home Depot and Lowe’s are holding up until the macro tailwinds return. (19:11) With summer officially kicking off, we thought it was a good time to catch up with Trex CEO Bryan Fairbanks. Motley Fool analysts Andy Cross and Sanmeet Deo caught up with Fairbanks about the war on wood decks, how the company is handling tariffs, and why he expects business to boom as the macro picture clears up. (33:19) Jason and Bill break down two stocks on their radar: Warby Parker and Pinduoduo. Stocks discussed: AAPL, MELI, TGT, HD, LOW, TREX, WRBY, PDD, Host: Dylan Lewis Guests: Jason Moser, Bill Mann, Bryan Fairbanks Engineers: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone, I'm Charlie Cox. Join us on Disney Plus as we talk with the cast and crew of Marvel Television's Daredevil Born Again. What haven't you gotten to do as Daredevil? Being the Avengers. Charlie and Vincent came to play. I get emotional when I think about it. One of the great finale of any episode we've ever done. We are going to play Truth or Daredevil.

What? Oh boy. Fantastic. You guys go hard, man. Daredevil Born Again, official podcast Tuesdays, and stream season two of Marvel Television's Daredevil Born Again on Disney Plus. especially summer. This week's Motley Fool Money Radio Show starts now. That's why they call it money. The Best thing.

Cool global headquarters. This is Motleyful Money Radio Show. I'm Dylan Lewis. Joining me in the studio, Motleyful Senior Analyst Jason Moser, and Chief Investment strategist over at Motleyful Asset Management, Bill Mann. Fools, wonderful to have you both here. Hey, hey, hey, Dylan. This week, we've got a mini-dive on the quintessential summer stock with its CEO, a look at the home improvement market. And of course, Bill, Jason, you guys have brought the stocks on your radar this week. We're going to kick things off, though, with an unexpected hardware update in the AI landscape. OpenAI will be buying I.O., a device startup led by famed Apple designer, Johnny Ive. Jason, Ive, and CEO Sam Altman have apparently been in

talks for a while. That's led to this $6 billion deal. We've been thinking about AI generally in a software sense. Interesting to see a hardware development here. It is, and I think you had to expect at some point or another for this to happen. I think that while you look at Open AI today, and that's obviously not in our realm of publicly traded companies that we typically cover here at The Fool, I think it's interesting to think about this deal from the perspective of Apple and actually what it means for Apple, because if you look at the lineup of talent that is going to be over at Open AI working on these devices and this sort of strategy going forward, there are a lot of Apple veterans beyond just Johnny Ive.

So from that perspective, I think two things here can be true, right? I think this is absolutely something that has the potential to be a threat to Apple, given its apparent lack of progress in the AI space to date. But we also shouldn't get ahead of ourselves here, because this all sounds good on paper with the amount of former Apple talent, but building compelling devices that ultimately do something different than what we're used to doing today, and then actually changing consumer behavior is really hard, and most importantly, it takes a really long time. It almost sounds, instead of calling them Apple talent, you might describe them as Apple dissidents.

The way that Johnny Ive is talking about the iPhone, which he was very instrumental in developing, is almost like he's talking about Frankenstein. He does not think of it as being something that is an unalloyed good for the amount of intrusion that has into our lives, which makes it interesting to me that they're coming up with another form of technology. I think that the real, the thing I wonder about most is how they are going to make an AI piece of technology that is somehow less intrusive, which sounds like what he wants to do. Some in the financial media are likening this to meta, then Facebook, buying Instagram for a billion dollars back when it was a 13-person company, because at the end of the day, we're going to have to be a little patient with this IO development. I think this is basically pre-product. There's nothing that they're really showing out here that says, this is what we are doing, and this is the plan. But I think if you were to handpick the person, Bill, who would be developing the next great consumer product, you could pick a lot worse than Johnny I. He's probably the first person you'd want to be doing this.

Yeah, and again, going back to what his misgivings were about his first time around, you know that he's bringing a sensibility that brought one of the most beautiful devices that we can imagine, one of the most evocative devices that we can imagine that has really changed so much of how we even interact with. each other, but at the same time, he's not 100% happy about it, so I'm not, you know, it's going to be fascinating to see how he changes his philosophy about this device. Yeah, and I think you made a good point there, Dylan, just in regard to this is essentially pre-product, right? I mean, we ultimately have no clue what they're thinking about, and it sounds like maybe they're still in that development stage of trying to come up with exactly what they want to introduce to the market.

And I'll refer to a few of the things that Sam Altman said here. He's talking about developing a product. He says that has never happened before in consumer hardware. I don't know what that means, but there you go. But furthermore, when we think about the smartphone today and how it impacts virtually every minute of our lives, right? I mean, we do so much more on our smartphones today than we ever have before. I think it's also important to note they don't actually view what they're doing as something that's necessarily going to displace or disrupt the smartphone necessarily. And they used a good example there. I thought, in the same way that the

smartphone didn't make the laptop go away, they don't think that the first product that they make is going to be something that ultimately makes the smartphone go away. But it will introduce, perhaps, a different way of doing things, utilizing this AI technology that's obviously grown by leaps and bounds here in the past year. All right. From one visionary to another, Mercado Libre dropped earnings earlier this month. They weren't quite done with updates. The e-commerce and fintech giants, South America announced that founder and CEO, Marcus Galprin, will be stepping down from his leadership role. And, Jens, I'm going to dip straight into the mailbag here. Irina, a listener from the

Czech Republic, which is pretty darn cool, wrote us a note immediately after the news came out. The founder and current CEO has written a letter to employees and it's very touching. For me, it sounds like the essence of how a transition should be conducted. I would love to hear The Fool's two cents. All right, Bill, what do you think? You left something out when you described Marcus Galperin, which is billionaire. You know, he's a young man. He's not retiring. He's just looking to move on and do other things. He has succeeded in any way you would hope to succeed. And it suggests to me that he believes in his bench because he is very tightly tied to. His financial success is still tied very tightly to Mercado Libre. So yeah, he's doing it at the right time. It will be interesting to see. We've seen this happen so many times when Howard Schultz left Starbucks at what you would think was at the top, and it turned out to be at the top. So it's up to his bench, but it is interesting to see that he has enough trust in them that he's moving on.

Ariel Sharstein, the president of commerce will be stepping into the role. And Jason, I have to be honest, it seems like about as good an executive position as you could line up. This is a company with a vibrant e-commerce platform, a bustling fintech platform, a lot of things going the right direction, clear roadmap here. That ball is rolling. Don't screw it up, right? And I mean, it's not to say, I mean, I say that's somewhat tongue-in-cheek, but I mean, shoot, you look at Disney, for example, when Iger handed the reins over to Chapec, and really, that ball was rolling.

Things were in pretty good shape. I mean, maybe there were some decisions made pre-C-C-Pek, but Chepec got in there and kind of did some things differently, and it didn't really work out. So it is a great position for Sharstein, but again, it is still a job that's going to require the ultimate execution. There is something else that's really great that's going on for them, which is that the Argentine economy has gone from being a basket case to being somewhat successful. So he is handing over the reins at a time in which one of their biggest markets has real momentum for them. Absolutely. Mercado Libre, not necessarily a household name for a lot of folks who follow

the U.S. market. A lot of fools know it because it's something that pops up quite a bit in our premium services. But zooming in on Galbrain's tenure, he launched the company, his co-founder, took that company public shares up roughly 9,000% in the time that Mercado Libre has been a publicly traded business. Pretty good. He built an e-commerce company that does tens of billions of dollars in gross merchandise volume, a fintech arm that was originally intended to facilitate the e-commerce business, now does hundreds of billions in total payment volumes. Bill, he may be one of the most visionary leaders that does not get enough press.

Yeah, I would say that he's very high on that list. When Mercado Libre launched, it was meant to be and was described as the eBay of Latin America. And now it's so far beyond that, it became the Amazon of Latin America, which is not an easy place to build a business like this. And so they have some real monopoly characteristics at Mercado Libre now. And Galprin is not someone we talk about at all, but I would put him on the Mount Rushmore of executives and CEOs and founders over. the last, just call it 20 years. Nobody ever gets the flowers while they can still smell them. Bill, I'm glad you're bringing them.

Jason, any CEOs you think deserve a little bit more love than they're getting. Yeah, want to bit off the radar, speaking of emerging market, e-commerce billionaires, a company that I've spoken with our colleague Emily Flippen about recently called Coupong, which is basically the Amazon or Mercado Libre of South Korea. And founder of Sukbum Kim still owns nearly a 9% stake in the company, World north of $4 billion, controls close to 75% of total voting power there, according to the latest proxy that was just filed in April. So a very interesting company.

Now, I think this question for me is just in regard to its market opportunity, given that it holds about 90% market share in its home country of South Korea, how far it can expand outside of those geographies? They kind of tried Japan, pulled back. They're looking at Taiwan, so we'll see how that all shakes out. clearly a business that has done a lot right, and that's very much in thanks to their founder, CEO. Bill, you are the king of obscure stocks.

I have to give you the final word here. What do you got? It's a little $132 billion company called Danaher. Danher has something called the Danahir business system that is really developed by their longtime CEO, Stephen Rails. They have returned superior returns on capital to the market over the last. 40 years, incredible track record that he and they have. And he's not someone who's spoken about a lot, but when you think of Dana Heur, when you do, Stephen Rale should come to mind.

Basically, a bonus radar stock segment, this show. Absolutely love it. Don't worry. We still have our traditional one coming up later. We've got a lot more coming up later, in fact. The dollars and data on home improvement and a lot more. Stay right here. You'll listen to Motleyful 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 off 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 cashmere crewneck 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 the 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 Motleyful Money. I'm Dylan Lewis here in studio with Bill Mann and Jason Moser. And we're digging into retail. Target out with fresh numbers and Home Depot and lows showing the state of home improvement. Bill, we have long been waiting for the target turnaround.

We will continue to wait for the target turnaround. I think one of the most amazing statistics from Target actually comes from Walmart, which is this. 75% of Walmart's market share gains came from households that make more than $100,000. Walmart is taking over Target's core market. Target has completely lost its way. And as we've seen in retail, if you are a retailer who has a little bit of fire in your brand, you're doing fine. But the ones that have lost their way like Target, they are getting beaten up and badly so. People have been wondering for a long time, Jason, company like Target, surely at some point, strong brand, people still like to go there for some things.

There has to be some point where they get things right. Is there something that would get you interested in this stock? That's a tricky one. I will say, if you want to look at least as some positives from the quarter, digital sales stood out. That was driven by a 36% increase in same-day delivery through the Target Circle 360, as well as continued growth and drive-up, which now accounts for close to half of total digital sales. So it seems like they're making progress on the digital front, and then everything is going back to tariffs and how exposed these retailers are.

It does sound like at least they are diversifying that supply chain. You go back to 2017, they had about 60% exposure to China. Today, that's about 30, and they feel that it will be under 25% by. the end of next year. So they're making progress there as well. We've got a long weekend here, busy one for the weekend Warriors, at least for me. I got some projects lined up. Probably some folks making some trips to Home Depot and Lowe's. And you know what? We've got to look at what's going on with those businesses this week. We're going to start out with Home Depot. JMO, how are doers getting things done right now?

Oh, doers are getting things done, at least in this climate, right? It's not great, but it's not so bad for these home improvement companies. We saw earnings per share, $3.56 for the quarter that was down just modestly from the year ago. Comp average ticket was essentially flat, and transactions only decreased about half a percent, which I thought was pretty encouraging. The thing that kind of stood out to me, big ticket purchases, those $1,000 or more, that was actually up three-tenths of a percentage point up from a year ago. So I thought that was encouraging. And furthermore, the fact that they maintained guidance for the full year was, was a positive, and I love that they refer to this in the call, because I think it paints a long-term picture here as to why you want to own these companies. Today, more than 55%

of houses in the U.S. here are 40 years old or older. And that just begets lots of renovations and repairs and demand that's going to be coming down the pipeline for these home improvement companies in the coming years. Warren Buffett describes retailers as businesses that have to be smart every day. And I think one of the things, and Jason kind of rolled right past this and said, 0.3% growth in $1,000 plus tickets. That is a reversal for two years of declines. And some of that has to do with things being pulled forward because of COVID when we were sitting at our houses during the pandemic, staring at things that needed to be done. So those things that needed to be done, got done. But what's really interesting about Home Depot and Lowe's is that they are competing

with each other and really nobody else at this point, even for those types of projects. The run for both businesses has been tough. You mentioned that there was a lot of growth pulled forward, also the higher rate environment eating into some home improvement projects that people might be financing. One bright spot I did notice looking at Home Depot's results, the SRS distribution segment. Jason, this is a business that they bought focused on roofing, landscaping, pooling, and it seems like it was responsible for the majority of the growth that they were pointing out year over year. Yeah, it was, and you can be forgiven.

If you look at the difference between the top line growth there, of what, somewhere in the neighborhood of 9% or something, comps being so ultimately low, they really are benefiting from that acquisition. They'll anniversary it, I think, here in June, so very shortly, but there's no question. That was a very big acquisition. I think it was the biggest acquisition in the company's history, if I'm not mistaken. They're biting off a lot there, but it seems like they're integrating it nicely, and it will absolutely just expand that network.

They'll get better at distribution. So I suspect Home Depot will continue to maintain its position in the market. Perhaps borrowing a little bit from the Home Depot Playbook, Lowe's announced in April that they're acquiring Artisan Design Group, say business-focused on design services, looking at flooring, cabinets, countertops. A little bit of a smaller deal, one billion dollar deal. Aside from that similarity, Bill, anything. that stick out to you as you stack these results together?

There are two halves of the same whole. I mean, I described them earlier as a duopoly, and I think that that's the case. They are both very smart retailers, and if you notice, they tend to speak of each other in a very complimentary fashion, and that is, I think that they both recognize that the game for both of them is to make sure that they don't get disintermediated by somebody else, rather than each other. So that's why you see these bolt-on acquisitions for both of these businesses, trying to make sure that they remain as relevant as possible within this segment. I think there's a word for that, right?

Isn't it? What is it? Frenemies? That's what the kids are calling. Yeah. All to say, Bill, when the macro picture improves, you expect both of these businesses to thrive? I do. I thought it was really interesting in the Home Depot call, where they said basically that they're going to generally maintain prices. And I think that has a little bit to do with the conflagration that happened this week when Walmart openly talked about pricing and the tariffs.

I think that they're being very, very careful and about how they talk about this, and they're only going to go to price because of tariffs in a very small, incremental way. I think also it's interesting to look at these two companies together. Home Depot is significantly larger in market cap, store footprint, and whatnot. You look over the last five years, Lowe's has been the outperformer. Now, you stretch that out over 10 years, and Home Depot's, you know, the outperformer there. But it was something that struck me, when Marvin Ellison took over the CEO role at Lowe's, one of the main priorities was taking that cash cow business and starting to

return some value to shareholders. And I think that's been a big part of Lowe's outperformance of these last several years. And if you just look at it from share repurchases alone, over the last five years, Home Depot's share repurchases, brought that share count down about 8%. I mean, hey, that's great. As a shareholder, I'm feeling pretty good about that. Lowe's, that share counts down like 26% over the same time period. That whittles down that overall pie of shares outstanding, making each share a little bit more valuable.

And clearly, I think that's had a big role in that outperformance. And given Lowe's undervaluation as compared to Home Depot, I would describe that as, being a better capital allocation than Home Depot's, although both are good. Fully agree, and Lowe's is also a dividend aristocrat, so they still prioritize that dividend. A million-dollar question for me. I have a trip planned to Home Depot tomorrow to pick up a lawnmower and shed. Are you guys making a trip this weekend? You know, I don't think I'm going to need to make a trip. I've already got the lawnmower, and I'm certain I'm going to have to mow the grass by Sunday.

I recently installed floating numbers on my house, and I'm so proud of myself for having done it right that I think I'm going to sit this week. Take the W. All right, Bill Mann, Jason Moser, fellas, we will see you guys a little bit later in the show. Up next, we hear from the CEO of a company you see On Shelves at Home Depot. Anne Lowe's, Brian Fairbanks, and his company Treks. Stay right here. Bill's things about with full money.

Some of the best lessons don't come from a classroom. They come from experience. On the power of advice, a new podcast series from Capital Group, you'll hear from CEOs, investors, and founders about how they built careers, took risks, and reinvented themselves. If you're starting your own journey, this is the kind of advice you won't want to miss. Available wherever you get your podcast. Published by Capital Client Group, Inc. Welcome back to Motley Full Money. I'm Dylan Lewis.

It's Memorial Day weekend, and if you're like me, you've probably got a few home projects lined up, maybe some plans to be hanging outside and putting food on the grill. With Summer officially kicking off, we thought it was a good time to catch up with Trek CEO Brian Fairbanks. His company is the brand name in decking. If you've got one, you already know. their recycled composite products are coming for the standard wood deck. Motleyful analysts Andy Cross and San Mateo caught up with Fairbanks about the war on wood decks, how the company is handling tariffs, and why he expects business to boom as the macro picture clears up.

Trex really invented, Brian, the composite decking category decades ago. And so just lay out what is composite decking and what does Trex do special? What makes Trex's products special? So composite decking, it's a mixture. of wood and recycled plastic. We extrude that into a material that can be installed with hidden fasteners or directly with a visible fastener on the deck. We have products that range anywhere from $2 a linear foot to over $10 a linear foot, depending upon the aesthetics of the product, the design capabilities of it, and what that specific customer need is going to be. In addition to the

decking products, we also have a large selection of railing. Again, many different price ranges, anywhere from more entry level, where products of our enhanced T-rail product, which is designed to replace a vinyl PVC type product, all the way up to our most premium cable rail type systems for high-end installations. Trex has been doing this for over 35 years now. We stick to our knitting. We know what we're doing in the outdoor living area, and we're proud of the products that we've put into the market over the years and see a great growth runway ahead of us. And Brian, is it fair to say that Wood is really a primary competitor of you? Like, you are trying to, you are trying to redefine and have for so many years what it means to have a decking

out of the back of my house, for example. Yeah, absolutely. If we look back to the 2016 time frame, We'd really been focused on just the premium part of the marketplace. Most of the prices were going to be three, four times the price of wood. We recognized at that point for long-term growth opportunities, we needed to really hit where the market was, and that was wood. We started talking about designing a product specifically to go after that market right around 2017 timeframe, and in 2019, we had launched our Enhance product line. That product was picked up by both Lowe's and Home Depot.

They carry that on their shelves. They still to this day carry that on their shelves. But we also sell it through our Pro Channel partners as well. So it's widely available across the country. You'll be looking at over 6,000 locations where our product can be serviced. And one of the most important parts of our strategy, we want to be available wherever that consumer is looking to be buying decks. And, of course, there's a lot of wood decks.

that are still sold out there. Approximately 74 to 75% by volume is a wood deck today. So a significant opportunity for us to go after. Since we've launched our enhanced product line, composites were probably about 18% of the market in that time frame. Now it's 25, 26% of the market. So it has delivered on the strategy, but significant upside ahead of us still. Brian, let's talk a little bit. You mentioned the Home Depot and Lowe's. I want to just clarify. some of the distribution directions and areas where Trex plays. So let's just say I'm going to remodel my deck. And a lot of your business is tied to remodel. Let's say I'll remodel my deck. Explain to us where Trex fits in when it comes to distributors, when it comes to dealers,

when it comes to retailer. How do I get a Trex onto the back of my house? That's an important point you made there. We are primarily repaired remodel. 90 to 95% of our business is repair and remodel. There is a reasonable business with those home builders out there, but the home builders do a great job on focusing within the house. How do you get upgrades inside the house? Not as much on the outside. I do think there's significant opportunity there. As it relates to the channel itself, one of the unique value propositions with Trex is that we have the largest footprint of areas where our product can be purchased. And let me go through that in a little bit more detail. First, we have, as I mentioned, shelf space with both Home Depot

and Lowe's. So every one of their stores, either we have the product on their shelves, or they can order any one of our other products through special order. Then we also have the side of the business with a builder's first source, a USLBM, an 84 lumber. Most of those are going to be catering more to the pro business. So we're really trying to make sure that wherever the customer wants to shop for, whether they're at the kitchen table working with the contractor, they're walking into a builder's first source location, or they're walking into a home center. They are going to see the Trex product there, and they're going to learn about that Trex product. A little bit further on the value chain, with our home centers, we will ship product direct into their distribution centers, and then from

their distribution centers into the stores themselves. Let's call it 30 different skews that maybe go into a store that are being sold direct from trucks. The remainder go through distributors. And distributors are company like Boise Cascade, specialty building products, international wood products, companies like that where their specialty is being that middleman between the manufacturer and the end retailer.

So they can special, the home centers can special order through distribution. In the case of the Pro Channel, with the Builders First Source, we're selling direct to the, to the distributors and then they're reselling into the Pro Channel Center. So a little bit of a complex channel there, but it works well in getting material out of our factory and close to where the consumer needs it.

Brian, I mean, I'm sure you've been anticipating this question. So tariffs, what do they mean and not mean for Trex's business? We're fortunate. We are primarily a North America produced company, I should say, even more so at United States. 5% of our total cost of goods sold are going to be potentially impacted by tariffs. Now, that's a little bit larger number than our direct manufacturing. And the reason that I put a little bit more in there, we buy some railing from overseas, so that will be tariffable coming out of some Asian countries. But there's a whole indirect purchasing side of the business. Think about gloves.

Think about safety glasses. Virtually all of those are manufactured in Asia somewhere. And even though the rates have come down, there still appears to be there's going to be a tariff on those sort of products out there. Small motors, small sort of maintenance sort of things that we keep on the shelf. Those are things that are extensively produced outside the country. So even when you are primarily a U.S. manufacturer, we are not going to be immune from these tariffs. We'll start to see the impact on the direct purchasing over the next quarter or so. We can easily manage that. The part of it, that's the indirect, we can also easily manage it because of the dollar value of it.

But I think it's one of the pieces that the media misses a little bit right now of these longer-term indirect effects that we're going to see with this tariff. Whether it just stays at 10 percent or whether it's 25 or 35 percent, it just really comes down to the magnitude. of what it's going to be. But overall, I'm very comfortable where we are, our ability to be able to mitigate it. Our supply chain team has already done a great job in identifying where they're coming from, being able to negotiate mitigating strategies with our suppliers, and understanding what piece of that will be flowing through to Trex. Do you find that you're able to pass on that pricing, even if it's a minimal amount to customers and is there resistance to it?

we have not passed along any of that pricing as of yet. And I've told our customers that we're going to take a little bit more conservative approach on this than many of our competitors are. I've felt that with this whole tariff regime coming in place, there was going to be a lot of moving parts on it. And to immediately jump and say you're going to take 10%, 15%, 20%, whatever the number is, the chances of being wrong are pretty high. and you might have to go back out, you might have to rescind that pricing again.

So what I've communicated to our channel is that we're going to see how this all comes together and understand what the real long-term numbers are going to be. How much can we mitigate through negotiations with the channels that we operate within how much of it at the end of the day will pass through to our income statement? And then, of course, we will look at pricing to be able to offset that along the way. But we're taking a little bit of a step back and waiting to see where this all settles out. Now that we've kind of set the stage and the stage is made of Trex decking, of course, it's time to talk a little bit about the bigger picture.

So a lot of talk about a potential recession, you know, on and off talk. We're seeing some slowdown in the housing market. How does Trex kind of navigate this potential recession scenario and housing slowdown? How has it done in the past with similar slowdowns? I think we can just look over the past couple of years. Repair and remodel has slowed as well as the new home side of things. It's been stable, but we're still well below where we need to be from a replacement cycle. And then existing home sales continue to lag where they need to be. I was really hoping this year to see the

existing home sales increase considerably. That does tend to be a driver of repair and remodel spend. If we look historically around recessionary time periods, Trex has tended to perform considerably better than rest of repair and remodel. Part of that is because wood decks are always falling apart. It doesn't matter what the economy is going to be. People will need to replace those decks. The other thing is, our consumer does tend to be a little bit better off from a financial perspective. Our average entry-level consumer, $100,000, $125,000 family income at that entry level and at our more premium products moving up $150,000 family income beyond that. So we operated a a little bit higher level from what many organizations operate in. I think probably the thing

that's most exciting for me is that we've been in a cycle now that people have been underinvesting in their existing homes since the end of 2022. End of 24, we hit the projected low spot about a dollar per square foot of livable space. On average, that repair and remodel rate should be closer to $1.26 per square foot. So you've got 22, 23, 24, all of those years have been underinvested. And Zondi Economics makes the projection that by 2027 time frame will be back to that average again. That's just back to the average. Now you have to catch up for all of that underinvestment that we've had for the prior three years. So that's why I'm pretty excited about the marketplace. There's a lot of other noise out there the consumer has to deal with,

but the underlying piece of it that's going to generate the demand, that is going to be there. to work our way through this short term here and get the consumer feeling a little bit better about making those investments into their home. Brian, my follow-up and my last question is just one thing that we should as investors continue to watch going forward when it comes to Trex. Yeah, Trex has been in a trading range now for the better part of a couple years. I think you'll see a lot of repair, remodel, a lot of building product type companies have been in that. Even if we look outside of the Magnificent Seven, that's where the large, the largest piece of the growth in the market has come from. As we start to see some of these

economic metrics come back, we will start to see a broader expansion of valuations in these companies. Our company, we're trading at a lower multiple than we have in a considerable period of time. And when we start to see some of the general economic indicators pick back up again, we start to see that higher level of growth. We have the profitability. And I I think the stock will be back off to the races again. So pretty excited about that. I'm more excited because of that pent-up demand. If we didn't have that out there, I'd be a little bit probably less sure about it,

but because of that extensive pent-up demand and that we will see existing home sales begin to expand over the next couple of years, great opportunity at this point. Listeners, unlike Brian Fairbanks, I do not have a Trek stick. So my summer prep involves a bit more work, and I've got that to look forward to this weekend. If you're a Motley Fool premium member, you've got more of that conversation to look forward to. You can catch Andy and Sandmeet's entire Convo with Brian Fairbanks over in our video hub and planning more conversations on our Full 24 member live stream. And if you want to become a Motleyful member, you can join Stock Advisor at Fool.com slash sign up.

Coming up after the break, Jason Moser and Bill Mann join me again to talk about the stocks on their radar this week. Stay right here. You're listening to Motleyful Money. Another turning point of fork stuck in the road. Time grabs you by the... The old address you're where to go. So make the best of this test and don't ask why. It's not a question but a lesson.

The old adage goes, it isn't what you say, it's how you say it, because to truly make an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport. The Range Rover Sport blends power, poise, and performance. Its design is distinctly British and free from unnecessary details, allowing its raw agility to shine through. It combines a dynamic sporting personality with elegance to deliver a truly instinctive drive. Inside, you'll find true modern luxury with the latest innovations in comfort.

Use the cabin air purification system alongside active noise cancellation for all new levels of quality and quiet. Whether you prefer a choice of powerful engines or the plug-in hybrid with an estimated range of 53 miles, there's an option for you. With seven terrain modes to choose from, terrain response to fine-tuned your vehicle for the roads ahead. The Range Rover event is on now. Explore enhance offers at Rangerover.com. 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 us on anything based on language here.

All personal finance content follows Motleful editorial standards. It's not approved by advertisers. Advertis are sponsored content provided for informational purposes only. If you're listening to the podcast version of this, you can check out our full advertising disclosure in the show notes. I'm Dylan Lewis, and Bill, I think you might have a thing or two to say as well. Dylan, I serve as chief investment strategists at Motley Fool Asset Management LLC, an affiliate of the Motley Fool.

While affiliated, MFAM is a separate and independently regulated entity. None of the investment decisions made at MFAM involve individuals from the Motley Fool's media or business operations. As you know, Dylan, all of Motley Fool's money management operates independently in this way. I appreciate you clarifying that, Bill. We are back. This is Motley Full Money. Before we get over to our Radar Stock segment, as we usually do, I have a quick programming note. This will be my last show in the host seat for Motley Full Money. It has been an honor and a joy to sit here working with our in-house analysts like Bill and Jason and our engineers, Dan and Rick, on the show each week.

Almost 11 years ago, I came to The Fool as a freshly minted college graduate armed with a finance and journalism degree and some vague sense of how that might be useful for myself and for the world. and The Fool has been a tremendous place to be turned loose and work on that. I'm grateful to all my colleagues to Tom and David Gardner for letting me be a part of TMS voice out here. And I feel very lucky that no matter what's been going on in my life, each week I've had the chance to talk to folks and make sense of what's going on in the market and what's going on in the world. Listeners, I hope you've enjoyed our conversations as much as I've enjoyed having them.

And while I'm heading out, the show goes on. Motleyful Money will continue next week, and I will be one of the dozens tuning in. I have two things to say about that. Number one, it's been a privilege to work with you. And number two, Jason, you know he said my name first. I do. I do. Well, I mean, age before beauty, right? Dylan, really quickly, you said the word, it's been an honor. And I've known you ever since you've been here, and I've really enjoyed working with you.

I'm going to miss you, but also know you're going to light the world on fire and whatever way you choose. All right, with that bit of sentimentality out of the way. Let's get on the stock on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Bill, you're up first. What are you looking at this week? We're going to talk about Mr. Toad's Wild Ride here and PDD group, which is ticker PDD, Pinduoduo, Chinese company that is the parent company of amongst other things, Timu.

So we are going to hear from them finally how the tariff regime has been impacting them, how the reduction in loopholes regarding drop shipping into the United States has affected them. I would imagine that it is overstated what has happened to this company. I suspect they're going to have a report that is better than we anticipate. Dan, a question or a comment, perhaps, about Pnduodoo, ticker PDD. Yeah, how much of their business is TEMU? Because TEMU is generously a steaming pile of crap when it comes to what it offers. So I'm just curious about that.

It is a fairly large component of their business. It is a larger component of their business outside of the United States versus inside of it, which I think is the more important part. And I will leave the editorializing of their business and their products to Mr. Dan Boyd. Jason, I think you might have an easy case to make this week. What is on your radar? It's a company I have not really followed very closely, but as a wearer of eyeglasses. I think I'm going to start paying a little closer attention.

That's Warby Parker. Ticker is WRBY. Now, Dylan, when Google Glass first came out over 10 years ago, it was revolutionary, right? But it didn't really work out. It didn't live up to the hype and ultimately fizzled out. The technology has made a lot of progress, and now the company is going to give it another shot by partnering up with Warby Parker to roll out a new series of smart glasses, very similar to what we're seeing with Meta and its partnership with Rayban.

But the new specs will be built on top of Android XR, and will include Google Gemini, users can speak with to actually use the devices. And so Google has committed just a modest $150 million on their part, a little bit more meaningful for Warby Parker, of course. That'll get the ball rolling. And those are expected to come out here sometime after 2025. Dan, a question about Warby Parker, ticker WRBY. You know, I had glasses from Warby Parker before, and they were pretty good. But then I wanted to get another pair. This is like a year later or something. And they were like, no, you have to go to an optometrist first.

And I was like, don't you guys have my terrible eyes on file? Can't you just give me the same glasses as you did last time? And they're like, no, you need to go to a doctor first. And so I've never used them again. I guess that's how it works. Geez, I mean, at some point, doesn't that prescription expire and you have to have something updated? They have something on file.

If I tell them, I want the glasses, why can't they just give me the glasses? They're looking out for your best interest. Dan Boyd, anti-medic. He's not a fan of extra friction in the process. Dan, which one's going on your watch list this week? I don't know which way you're going to go. Hey, they both stink, but we'll go Pinduos. Dan, appreciate you weighing in. Jason Bill. Appreciate you guys being here bringing your radar stocks.

That's going to do it for this week's monthly full money radio show. Shows mixed by Dan Boyd. I'm Bill Lewis. Thanks for listening. We'll see you next time.