Motley Fool Money - Surprisingly Strong Q1, Stocks To Watch, Bezos' Next Move

Episode Date: March 31, 2023

The Nasdaq rose 17% in the 1st quarter, but we're not popping champagne just yet. (0:21) Ron Gross and Matt Argersinger discuss: - New inflation data and real estate concerns in Silicon Valley - Why they're watching company margins and guidance updates over the next few weeks - Disney shutting down its metaverse division - Lululemon's (unsurprising) write-down of Mirror - The latest from Walgreens, RH, and McCormick (19:11) Brad Stone, head of Bloomberg's global tech coverage, weighs in on the state of affairs at Amazon, whether Jeff Bezos will return as CEO, and what to watch in the growing industry of AI and ChatGPT. (32:40) Matt and Ron discuss Moderna's prospects, Pepsi's new logo, and share two stocks on their radar: ERP Properties and Wesco International. To get your copy of our free report "Top Stocks For Rising Interest Rates" just go to fool.com/interest. Stocks discussed: DIS, META, LULU, WBA, RH, MKC, AMZN, GOOG, MRNA, PEP, EPR, WCC Host: Chris Hill Guests: Ron Gross, Matt Argersinger, Brad Stone Engineer: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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What? Oh, boy. Fantastic. You guys go hard, man. Daredevil Born Again, official podcast Tuesdays, and stream Season 2 of Marvel Television's Daredevil Born Again on Disney Plus. The first quarter of the investing year is in the books. Motley Full Money starts now.

That's why they call it money. Cool global headquarters. This is Motley Fool Money Radio show. I'm Chris Hill, joining me in studio. Motleyful Senior analyst Matt Argusinger and Ron Gross. Good to see you both gentlemen. How you do, Chris? We got the latest headlines from Wall Street.

Brad Stone from Bloomberg is our guest. And as always, we've got a couple of stocks on our radar. But we begin with the big macro. The latest inflation data, the purses. Personal consumption expenditures price index. Say that three times. No, thank you. Showed an increase of 0.3% in February. This is one more data point that the Federal Reserve is watching closely as they decide whether to raise interest rates again or not. This also

coincided with the end of the first quarter of the year for investors. The Dow basically flat year-to-date. S&P 500 up around 7%. NASDAQ up around 17%, Ron. coming into the year, if you told me that's where we'd be at this point, I think I would have been thrilled. But with all of the bank drama earlier this month, it doesn't seem as good as the numbers would indicate. Yeah, well, we can get to the macro stuff in a minute. But, yeah, I agree. I want to talk about the markets and the performance because it does not feel to me like we're in any kind of a strong market. Right.

January was strong. February was week. March, we had a banking crisis. But yet March then actually ended up kind of strong. It's been all over the place in terms of volatility. And I think rather than the graph being up and to the right, we haven't felt that way. And that's perhaps why when I noticed that the NASDAQ was up, as you said, 17%. I was like, wow.

Now, of course, tech was crushed last year. And so we did get some sort of a rebound, but we're getting a rebound in a rising interest rate environment, which I wouldn't have necessarily predicted that. So, you know, people may be feeling somewhat good about their investments, but I think they're still feeling very shaking about the economy. And as we discussed in previous shows, anything with the word contagion. in it is really kind of on the dicey side and creates quite a bit of anxiety. I agree. I mean, it's been such a roller coaster. I mean, I feel like we've lived a year in this first quarter. I mean, inflation's been persistent. The Fed's been relentless. We've got recession fears. We've had mass layoffs in the tech sector, which keep coming. Disney's the latest, not really a tech company,

but we've had the biggest bank failure since the global financial crisis. And, of course, this regional banking crisis. And we've got these problems in the commercial real estate market that we should also talk about. But the fact that we are where we are is pretty impressive. I mean, if you'd been an investor who'd sat on the beach since the beginning of the year and didn't check your phone, as you said, Ron and Chris, it's like, well, you're feeling pretty good, but then you're not feeling good. But then you feel good again.

Well, then you kind of feel good again. And the economic numbers are interesting. So we are seeing a slowdown in the economy. We are seeing inflation come down. but slowly. It's taken a while, and that's why I don't think we're done quite yet with interest rate increases. You know, predictions, you're bound to be wrong, but probably one more than some stagnation, and then at some point declining interest rates, which I'm looking forward to. But, you know, what the Fed is trying to do is happening. It's just that job market is still very strong. We

needed to continue to be a little bit weaker. We did see that in the jobless numbers, but it's just taking some time. Maddie, I want to go back to the layoffs that you mentioned, because this week, we got two more tech companies based in Silicon Valley, electronic arts and Roku. They're both laying off 6% of their employees. They're downsizing their office space. And I understand the argument of people who say, well, the tech sector, that's not the whole economy. There's a much bigger part of the economy beyond the tech companies in Silicon Valley. And that's true. But when you look at Silicon Valley, it's hard for me with all of these announcements not to start thinking about the ripple effects, particularly when it comes to commercial real estate.

No, that's exactly right. And if you look at the, according to data from the San Francisco Chronicle, the current office vacancy rate, I was shocked when I saw this, the current office vacancy rate in downtown San Francisco is 29.4%. Wow. That in commercial real estate land, is a depression. It's eight times the vacancy rate pre-pandemic, and you can compare that to the New York City vacancy rate, which has also been hit pretty hard. It's at 16%. But either way, the point here is, yeah, Silicon Valley's been hit extra hard, but there's a bigger story here about commercial real estate, especially office. Vacancy rates are way high. We're in this new era of work from home or hybrid work where no matter what, corporations just need less space. And the problem is, Silicon

Valley Bank and others, it was a little bit of a harbinger for what I think could be a pretty big problem with commercial real estate lending. If you look at the regional banks, according to some data, 80% of the lending to the commercial real estate market comes from these regional banks. Ask any bank whether they're excited about refinancing an office building right now, especially with debt that's maturing in the next few years, and it gets really dicey. And that could give the Fed some cover to slow interest rate increases more quickly than they might have done otherwise, but it's hard to hope for that. It's hard to hope for a shock to the economy such that the Fed can slow down.

As I've said before, you know, choose your poison. Hopefully the crisis won't be too bad, and the Fed will be able to lighten up relatively soon, and we can all move forward. So we're about to enter in the near term. Let's just call it a three-week period where earnings season, is in the past. The next earning season is coming up, starting in about three weeks. I'll start with you, Matt. What are you going to be watching over the next couple of weeks?

And let's just put aside the possibility of another bank story coming forward and adding to the drama. What are you going to be watching to sort of give you an indication? Because it seems like part of what we've been talking about fits the narrative that we've been talking about for a few months now, which is the second half of 2023 appears to be set up for some positivity. Again, even keeping in mind what the market has done year-to-date, but over the next few weeks, what are you going to be watching? This is that period where I think companies, if there have been major changes to their business outlook, this is where guidance starts to come in.

A company will warn about their quarter. They'll try to get ahead the news. And I've got a whole list of real estate investment trust, by the way, that I'm looking for for guidance because I'm working for. because I'm worried about, especially in the office space as we've talked about, I'm worried about what that business looks like in terms of occupancy rates, net operating income. It's getting dicey, and I think that could tell a bigger story about the overall economy.

So that's kind of where I'm watching. Ron, what are you going to be watching? Yeah, I was going to say guidance. And also, I want to see what margins look like, because I want, especially with retailers, I want to understand what kind of discounting and promotional activity is happening and what pricing power looks like, how much control they have over price, And I also want to look at inventory levels because they're too high in a lot of different sectors as a result of weakness in the business. So I want to see if that inventory bleeds off.

This week, Disney began the process of laying off 7,000 employees. Included in the group is the 50 people who make up Disney's entire division focused on the metaverse. It's being seen as another move by CEO Bob Eiger to reverse decisions made by former CEO Bob Chappek. And Matt, we were talking about this earlier. I have to believe that a company like meta platforms, which is heavily invested in the Metaverse, is not happy to see a company like Disney with all of that intellectual property just shutting this whole thing down. I agree. I don't think that's a good news item if you're a Facebook meta, Facebook.

But I don't think this is yet a larger indictment on the idea of the Metaverse. I think this is more about Iger just axing anything that he didn't create. So he's just, you know, it's kind of running roughshod over everything Chappek kind of created. It reminds me a little bit of Disney Interactor Studios, which was a video game subsidiary that Michael Eisner actually started before Bob Iger got there. And Bob Iger ended up killing that too because it lost a ton of money. It could never really compete with the larger video game publishers. And the Iger eventually said, you know, we're just better at licensing RIP to companies like Sony and Activision rather than trying to make our own games. So I think, I don't think this is Disney shutting things off.

I think they're saying, let's wait for this market to mature. If it's a viable media universe, we're going to get our IP in front of it. And maybe this Apple news coming down this year might catalyze the Mendeverse to the way that Disney could actually start getting involved. Yeah, I think the metaverse does kind of make sense for a company like Disney. Eventually, right? Chepec called it the next great storytelling frontier. I can see that. That doesn't seem silly to me.

And again, connecting the physical and digital worlds. Again, for a company like Disney, I think that makes sense. Interestingly, Iger is not necessarily a metaverse skeptic. I believe he sits on the board of a startup called Genies, which is a company that helps users create avatars, which eventually are going to be used in the metaverse. So maybe down the road, we'll get back there. After the break, we've got the latest reminder that not every acquisition ends up working out. Stay right here.

You're listening to Motley Fool Money. Welcome back to Motley Full Money. Chris Hill here in studio with Matt Argusinger and Ron Gross. Three years ago, Lulu Lemon made its first acquisition ever when it paid $500 million for Mirror, a virtual home fitness company. In December of 2020, on our year-in-review episode, Ron picked the mirror acquisition as his choice for the dumbest investment of 2020, saying he was not a fan of the acquisition and comparing it to Under Armour buying My Fitness Pal for $475 million and selling it years later at a loss.

This week, shares of Lulu Lemon were up 15% after strong fourth quarter results. Ron, anything else in that fourth quarter report of interest? I don't like to tune my own horn, Chris. But they did have an impairment of about $443 million out of the 500. So just a review, they paid $500 million, and they just wrote down, let's just call it, 88% of it. That is what happened? Nice call, Ron. Nice call.

Thank you. They're not abandoning. the fitness, the fitness market. They're going to pursue it in a non-hardware way with a more app-focused strategy, which probably makes sense. And if they had done that in the first place, I wouldn't have had to be critical in the first place. But I do want to say that shouldn't take away from the strength of Lulu's business. Yes, that's a mistake. Okay, fine. But this has been a really wonderful business, a really wonderful stock. And the numbers back up the fact that they are continuing to execute quite well.

For the quarter, revenue up 30%, that's 29% in North America and 35% internationally. Com sales up 27%. Direct to consumer up 37%. Now, gross margins were down. We're still seeing some markdowns that are necessary to clear some inventory out. But in general, you saw a very nice control of expenses with operating market. margins actually up slightly, 50 basis points, not slightly, half a percent, and adjusted earnings as a result were up 30 percent. So they're continuing to get it done. They're doing a good job

bringing inventories down. They're still high, but they're getting them down over time. And they gave strong first quarter and full year guidance, trading it 30 times, a premium price, but a premium company as well. Walgreens's second quarter profits and revenue came in higher than Wall Street was expecting. CEO Ross Brewer highlighted the company's closing of its acquisition of Summit Health, saying Walgreens is now one of the largest players in primary care. Shares of Walgreens up more than 5% this week, Matt. Yeah, yeah, good results.

And if you look at their core pharmacy business, the same store pharmacy sales there were up almost 5%. Really strong. And then if you look at the U.S. health care revenue, which is Summit Health is joining on a pro forma basis up 30% year over here. That's pretty strong. But my question is, you know, will the real Walgreens please stand up? I mean, because there's just been so many moving parts to this company.

If you look about the $5 billion majority investment they made in Village MD back in 2021, majority investments in companies like Shields and Caracentrics. Then you've got the $5 billion Walgreens pay last fall to settle lawsuits, you know, related to its distribution of opioids over the years. Then you've got the $9 billion purchase of Summit Health. I mean, this has all happened within the past two years. And, you know, the stock is, underperform pretty starkly. It's lost about a third of its value over the last five years.

So I just think if you're an investor looking at Walgreens, you've got to let the dust settle on all these major capital moves, figure out how this U.S. healthcare revenue business is going to work, and then you can kind of decide if you want to invest in the stop. But to me, there's just too many moving parts right now. Yeah, it does seem like with all those acquisitions, if you're looking at this, if you're the board of directors, you're saying to Ross Brewer, like, okay, now let's put all of this stuff to work. Right. Let's just give it some time to bake, and then we can decide how to move forward. The struggles continue for RH. Fourth quarter profits and revenue came in lower than expected

for the company formerly known as Restoration Hardware. Shares of RH up a bit this week, Ron, but the last year and a half has really been rough. Stock was at 700, and now we're around 238-ish. Really been smacked. I don't want to hit a company necessarily only when it's down. For years, this was a... wonderful investment, one of the best performing stocks, really, that we would talk about. But they have fallen on hard times right now, and CEO Gary Feldman kind of went on a rant. I don't know how else to describe it on the conference call, blaming the Fed, inflation, interest rates, the banking crisis, all of those things for a decline in the luxury housing

market. And that kind of might be true, but ranting is really never a great look for a CEO. And so a little bit of restraint there, I think, would have been the better part of valor. But the business is quite weak, with revenue down 15%, gross margins down, operating margins down 960 basis points. That's 9.6 percentage points, which is really, really weak. Earnings down 14%. But if we adjust for some benefits, some income tax benefits, earnings were actually down 49%

inventory way up as they're having trouble selling things in this environment. So they're doing what they can. They're eliminating some jobs. They're trying to achieve cost savings of about $50 million annually. Guidance was weak. One thing that they always say, and I really don't like this, they say things like the market opportunity is $7 to $10 trillion. And if we only get 1%, Chris, that's a $70 billion to $100 billion opportunity.

I do not like to hear that kind of talk for management teams as an investor, as an analyst. That doesn't thrill me. They'll get back to business once the market firms, but they are spread really thin with hospitality and housing and galleries. They may want to stick a little bit more to their knitting. Shares of McCormick up nearly 15% this week after first quarter profits came in higher than expected. The Spice Maker also reaffirmed guidance for the full fiscal year.

Matt, what stood up to you in McCormick's report? Well, it's the strength of their flavor solution segment, which is their commercial food segment that serves restaurants and other major food manufacturers. The beauty, I think, of McCormick, is really, you've got this great balance between the retail and consumer-facing side, which makes up about 60% of sales, and this commercial business, which makes up about 40%. So during the pandemic, as people were at home, they cooked more, and people cooked predominantly for the first time in their life.

McCormick did really well with their consumer segment. Now that people are going back to restaurants and going out more, the commercial side of the business is picking up the slack where the consumer is slowing down a little bit. So it's just got this really great balance. And of course, you've got a dividend that continues to grow very nicely. I just think McCormick always seems to trade with such a huge premium. And it's shared. Right now, it's 32 times earnings. Now, it's always traded for premium. So I'm not going to quibble. But I would just say, gosh, if you you'd ever get this business cheap, which is rare, it would be quite an opportunity. From memory, I think they're also pretty good at acquisitions.

Red Chalula was an acquisition, I think made really good sense. Franks Red Hat. I like these acquisitions, and I often don't like acquisitions that companies make. I wonder if they have something else up their sleeve coming up. How seriously do you take the expiration date on spices? That's one of those things. Look, for medicine, I'm taking that very seriously. For spices, I'm like, really?

I have to buy a whole new bottle? They do say if it's been sitting in your cabinet for more than six months or so, that the flavor kind of goes away. But I think you can get away with it. All right, Matt Argusinger, Ron Gross, guys. We'll see you a little bit later in the show. Up next, is Jeff Bezos preparing a comeback to his former job at Amazon? Bloomberg's senior tech reporter Brad Stone weighs in.

Stay right here. You're listening to Motley Fool Money. Come back to Motley Fool Money. I'm Chris Hill. Brad Stone is the head of Florida. technology coverage for Bloomberg News. He is also the author of several bestselling books, including Amazon Unbound, Jeff Bezos, and The Invention of a Global Empire. He joins me now from California. Brad, always good talking to you. Thanks for being here. Hi, Chris. Good to be here.

Let's start with Amazon. CEO Andy Jassy has announced a couple of rounds of layoffs over the past few months, 28,000 jobs, which is a small percentage of the overall. workforce at Amazon, but it's also a population that is bigger than a lot of towns in the United States. And I'm curious what your thoughts are on the way Jassy and his team are approaching this, because there are certainly those who think, if you're going to do layoffs, you only want to do it once. And they've done it twice. And I don't think it's going to surprise a lot of people if there's a third round later this year. Right. Yeah. No, the, The number might be relatively small, but the significance is high.

Amazon has been in growth mode for most of its 30 years. I can point to a couple of years during the dot-com bus where they had some layoffs and slowed hiring, but essentially things have been up and to the right. Now, Jassy has had to deal with some pretty extraordinary circumstances, not just the pandemic and then the resulting slowdown in e-commerce, but arguably the kind of Jeff Bezos-led over-Bazos-led. building that preceded the pandemic. And I think he's been in adjustment mode, of course, correction mode. I also think that, you know, the inflation has thrown another variable into the

mix and probably also a declining stock price down, what, 30% over the last 12 months, maybe more. And Jassy probably catering a little bit to shareholders, to investors, to try to write the ship and change the sentiment around Amazon. To your point, it hasn't been handled as elegantly as possible. The idea that the latest thing is that they were stopping construction on the second phase of HQ2 is another black guy for a company and a process that was viewed very skeptically by a lot of people for a long time. So this is the handpicked successor of Jeff Bezos. How happy do you think Bezos is with the overall job that Jassie has done for the last couple of years? My belief is that if Bezos is in doing a full accounting here, then he probably, you know, a lot of the things that have gone wrong over the last two years can really be laid at Jassy's feet.

I think he would have to look at some decisions that he made himself over the past five years. Like, let's look specifically at what Amazon has cut back on or stopped doing in the past two rounds of layoffs. a lot of the physical retail, the Amazon Go stores, the bookstores, those four-star stores, that was the Bezos-led initiative. He was pushing the company into physical retail and experimenting, and they've rolled it back. It kind of didn't work. The devices business, Alexa. Alexa was originated and envisioned and orchestrated by Bezos himself.

And it was an idea that Amazon could be the, front edge and AI and that conversational assistance were the way that people would interact with chat bots. And now over the past few months, we've seen that that may not be true, that there's this technology called chat GPT that is much more interesting than Alexa. It'll be interesting how Amazon pivots there, but they've certainly had to take account of that. And then everything in the fulfillment centers, Amazon subleasing out space that it bought and didn't need. And that's a lot of, so I guess my answer is, my guess is that Bezos isn't second-guessing Jassy. My view is that he's probably not as involved, even as maybe Jassy and the other board

members might have hoped that Bezos has really moved on, and that this is firmly Andy Jassy's company. So the speculation that he might pull a Bob Eager, pull a Howard Schultz, and come back for another run as CEO. So you're not betting on that. It's fanciful. He has moved on. The name of the yacht, the super yacht, Chris, he might remember.

The yacht is called Kauru, and it means reinvention. And that's what Bezos has done right in front of our very eyes, physically, romantically, and lifestyle-wise. And he has moved on. We may find out soon that he bid for the Washington commanders. That process is ongoing as we speak. He has bought property in Hawaii. He's got the yacht now. He is fully involved in his climate philanthropy.

He's got a set of headaches to deal with at the Washington Post. So no, I don't, he's not one to revisit previous decisions. If anything, if you were, if you were asked me to guess, I would say that we'd be more likely to see him drop the executive title in his role as executive chairman, much more than to see him return to day-to-day operations at Amazon. Well, since I'm coming to you from the greater Washington, D.C. area, and it is a regular topic of conversation in these parts with the expectation that Dan Snyder is going to sell his NFL team. How serious do you think Bezos is about becoming an NFL owner?

I think he's serious. There's enough smoke here. I mean, we know that he hired Allen and company. I think the New York Post reported that. We know that Snyder, at least early on, blocked him from bidding because of enmity around the post coverage of Snyder's tenure as owner. We don't know if that's still true. I'm sure he would love Bezos to bid it up a little bit. And I don't know if Bezos has come back to the table after being rebuffed. But, you know, all this indicates to me that he sees this as another fun adventure for to have in this stage in his career. So I think if it's not the commanders, it's likely that when the Seattle Seahawks comes through the state process that it's currently in, that

he could be a bit of for that team. I definitely think he's interested. Earlier this week, Alibaba announced it's going to be splitting itself into six separate companies. How seriously do you think companies like Amazon and Alphabet are considering some version of a similar move, if they are even considering it at all? Yeah. Well, let me take Amazon, because Alphabet does not necessarily as much in my strike zone, nor do I think the activist pressure would be as an intense. And I'll get to that in a second.

But, you know, Andy Jassy is a first-generation Amazonian. He feels ownership over the entire thing. He started his career in the retail side of Amazon, selling CDs and DVDs. He was in the advertising business and marketing business, and then he was basically the founding CEO of AWS before Bezos made him CEO of the whole thing. He's much likelier to have the Bezos view that this business is stronger together. Now, the key point here is active shareholders who are noting the huge run-up in Alibaba's stock and all the excitement

around the IPOs of the particular six divisions. And I think that's got to be. people are noticing that. And I just do wonder if activists come to Amazon and advocate for something like this, what kind of defense that they could have after a two-year period where the stock performance has been so dismal. Historically, it's been Bezos, the founder, and his credibility that has protected Amazon. But with the distracted and detached Bezos, I'm not sure the defense is as strong. I don't think they're considering it to answer your question directly. I just don't feel like that's something that Jassy would want to spend time on. But the question is, if the current stock performance continues and the Alibaba split up

as seen as a great success, will activists force Amazon to consider it? I think it's likely. I want to move on to something that you and I were chatting about during the break. And it's as hot a topic in the tech world as there is. and it's ChatGPT. You mentioned OpenAI is based right there in San Francisco. Where do you think all of this is going in the near term? The next six to 12 months, what are you hearing from people you talk to

and what are you going to be watching for in terms of business achievements or milestones to give you a sense of what the next 12 months looks like for ChatGPT and AI? I don't apologize by the fact that the emergence and popularity of ChatGPT and Dali before it took me by surprise. It took the industry by surprise. Google was taken by surprise. But the attention, the hype around it has been extraordinary. So I don't have a crystal ball. I think that very soon we're going to start to see a litany of competitive responses from the likes of Amazon in terms of terms of how AWS extend some of these capabilities to its customers, to developers. Google I.O. is coming up in the spring. I think it's going to be wholly AI-focused. This is Google's

conference, and we're going to see a litany of announcements, and we're going to see Sundar Pachai, and maybe what could be almost considered a job-saving campaign, because the critics are out for him now, talking about his personal view. philosophy on AI and why Google is set to kind of recapture the lead. Arguably, it has the deepest bench, but Open AI really did take it by surprise. And I think we're going to see more conversation about some of the scary, possible ethical implications of these technologies and what it means for jobs and for society and education when kids have access to get AI to do their homework and write their papers for them. And then, you know, the next incarnation of these things,

chat, GPT5, you know, we just saw GPT4 just came out. Subscribers to Open AI can access it. It's a remarkable leap. And, you know, the next incarnation will be even more interesting. So I think, to me, it's exciting, you know. It's like one of these stages in Silicon Valley where the tech is surprising us and forcing us to kind of reconsider our assumptions about, frankly, how we're doing our jobs and living our lives and what it means that this technology is now available. So it's an exciting and unpredictable time. In addition to your reporting and writing, you are also involved with the podcast, Foundering, a show that takes a closer look at drama in the tech industry.

Tell me about the latest season. Oh, yeah. Thanks, Chris. I appreciate the opportunity. to talk about it. We've now done four seasons of foundering. I did a season actually on Amazon, and that was season three. And season four, we wanted to mix it up a little bit, is the rise and fall of John McAfee. And he's, you know, the cybersecurity pioneer who almost invented the industry in the late 80s, early 90s, and then went, I would say, right off the edge into the world of drug experimentation and violence and crypto scams. There was a presidential run in there. He was on the lamb and then died under mysterious circumstances. So it's a wild story. And my colleagues

did a great job with it. You can check out the Foundering podcast wherever you get your podcasts and pick up a copy of Amazon Unbound, Jeff Bezos, and the invention of a global empire. It is a great read and one of the best business books I've read over the last few years. Brad Stone, appreciate the time. Always great talking with you. Thank you, Chris. Appreciate it. Coming up after the break, Matt Argusinger and Ron Gross return. They got a couple of stocks on their radar, so stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about,

and the Motley Fool may have formal recommendations for or against that don't buy yourself stocks based solely on what you hear. Welcome back to Motley Full Money. Chris Hill here in studio once again with Matt Argusinger and Ron Gross. You can hear Motley Fool Money every weekend on radio stations across America. You can also listen seven days a week on your favorite podcast app. For example, we have a conversation with Motley Fool co-founder David Gardner coming up on the podcast. So take out your phone, open up your favorite podcast app, and with one click of a button, you can follow Motley Full Money and never miss an episode. Our email address is podcast at fool.com. Question from Tim in Wisconsin who writes,

I bought shares of Moderna in the summer of 2019 after listening to your show. I'm interested in your thoughts about continuing to hold this stock versus selling for other opportunities. What do you think, Ron? Good question, Tim. So it is a recommendation on our Rule Breaker service, and the recommendation is partially based on the excitement around M RNA medicines, which use the patient's own body to manufacture proteins that heal or prevent disease. And that is actually the technology that allowed them to create the COVID vaccine so quickly. They got $18 billion in cash.

It will allow them to develop their 46 drugs that they have in their pipeline, but it's not all good news because the COVID vaccine demand is significantly down. There's going to be a 73% decline likely in revenue from that this year. Future revenue beyond 2023 could be even less. But at seven times earnings with strong technology, strong balance sheet, probably fine as part of a well-diversified portfolio. I just personally wouldn't want it to be an outsized position. This year, Pepsi will celebrate its 125th anniversary, and as part of that, the company unveiled an updated logo this week.

Pepsi will start using the new logo this fall in the U.S. and Canada and then roll out to the rest of the world in 2024. Matt, they've been working on this for literally years. I would love to know as a shareholder how much money they spent on this new logo. I like it. I've seen the logo. it looks good, but if they come out and say, we spent $200 million developing this, I'm going to be chagrined. Well, you know, it's their brand is everything.

And I have to say, I like it as well. I'm a much more navy blue guy than a royal blue guy, so I like that color. If I had to go mad bend on it, I would say, I think the Pepsi name is a little too bold. But otherwise, I like it. It's probably worth every penny. I'm just going to say it's a circle and it's red, white, and blue, and it says Pepsi. I could have gotten in that for much cheaper than they fade. Next time, Pepsi wants to update their logo.

They should get in touch with Ron Gross. All right, let's get those stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Matt Argusinger, you're up first. What are you looking at this week? All right. I'm going with EPR properties. The ticker is EPR.

It's a real estate investment trust. That focuses on experiential properties. So you've got resorts, restaurants, bowling alleys, top golf is a major tenant. Places where people go to enjoy fun experience. But they get 45% of their revenue, Dan, from movie theaters. And by the way, one of their movie theaters tenants is Regal, whose parent company just filed for bankruptcy. So immediately, they're in trouble.

But not really. All the rent continues to be paid, even by Regal. This could be a record year for the box office. And by the way, Amazon and Apple are looking to spend quite a bit of money putting out films that they want to go to cinemas first. So if you're an investor who can tolerate some risk, Dan, EPR's dividend yield is almost 9%. well covered by the company's operating cash flows, balance sheets in decent shape, and the other parts of the business, non-theater parts, are doing just fine. Dan, question about EPR properties?

Matt, I want you to guess the last, the year, the last time I was in a movie theater. 2019. You're correct. And what movie did I see, Matt? Oh, my gosh. I saw cats, and it was terrible. I would have never guessed that. Wow.

You must have had that theater to yourself. It was like a Saturday afternoon. It was empty. It was great and also terrible because the movie is real bad. Ron Gross, what are you looking at this week? I'm looking at Westcoe International, WCC, originally formed in 1922 as the in-house distribution arm of Westinghouse Electric. You remember Westinghouse. Oh, yeah. Leading provider of business-to-business distribution, logistics services, and supply chain solutions. They're capitalizing a lot of exciting growth trends, grid modernization, green energy, automation, digitalization, and they're more than a typical distributor.

They offer a strong service component to their business and to their customers. So they have those competitive advantage. They have scale, distribution, and service. Their backlog is at an all-time high. Free cash flow is set to increase significantly over the years. My friends over at Value Hunter Service that we have here at the Fool thinks that it has meaningful. full upside at current prices. Dan, question about Westcoe International? Not really a question, Chris. More of a comment. You know why I love it when Ron is on the show

because he brings a company that I've never heard of and it's huge and super important to the entire world. There you go. That's kind of a nice thought. I can't tell if he's being sarcastic. I'm not. I'm being earnest. I love it. I've never heard of this company. And it seems like they're, well, If they disappeared tomorrow, a lot of businesses would be in trouble. What do you want to add to your watch list, Dan? I'll tell you what I don't want to add to my watch list, Chris, and that's movie theaters. All right. That's fair.

Ron Gross, Matt Argusinger. Thanks for being here. Thanks, Chris. Drop us an email, Podcasts at Fool.com. That's Podcasts at Fool.com. Keep sending us your questions about stocks and investing. That's going to do it for this week's Motley Full Money Radio show. The show is mixed by Dan Boyd.

Chris Hill. Thanks for listening. We'll see you next time.