Motley Fool Money - The Big Macro Gets Bigger

Episode Date: July 12, 2024

The Fed and big players in the market are keeping an eye on unemployment and the federal deficit too.  (00:21) Ron Gross and Bill Mann discuss: - How Fed Chair Jerome Powell and Jamie Dimon have more than inflation on their mind when it comes to the interest rate picture – they’re watching unemployment, the federal deficit, and spending.  - Why bank earnings were a bit of a mixed bag, and Delta’s results show the pain may continue for airlines. - A small acquisition from AMD that could be a big deal in the AI race, and Costco deciding to finally raise the price of its membership tiers.  (19:11) We kick off FoolFest 2024 with a trip into the vault – Motley Fool CEO Tom Gardner with author Malcolm Gladwell in 2014 talking through David and Goliath, the lessons that can be borrowed as we look at small disruptive businesses, and whether titans can hold their lead in major industries.  (34:11) Ron and Bill break down two stocks on their radar: Elf Beauty and Charles Schwab. Stocks discussed: JPM, WFC, DAL, AMD, NVDA, COST, ELF, SCHW Host: Dylan Lewis Guests: Bill Mann, Ron Gross, Tom Gardner, Malcolm Gladwell  Engineers: Steve Broido  Learn more about your ad choices. Visit megaphone.fm/adchoices

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We've got the big picture in full focus and a little preview of Fool Fest 2024. This week's Motley Full Money radio show starts now. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio Show. I'm Dylan Lewis. Joining me over the airwaves, Motley Fool senior analysts, Bill Mann and Ron Gross.

Bulls, great to have you both here. How you doing, Dylan? Dylan is really hot outside. Just a bit. Just a bit. I was not informed of this. Listeners, I hope you're staying cool, wherever you might be, especially if you're in Washington, D.C. We are going to be talking through a bunch of stuff this week.

We've got to look at how one chipmaker is trying to seize some of the AI action, a watershed moment in price hikes. And, of course, stocks on our radar. We are going to kick off, though, looking at the big macro. Ron, fresh inflation data. out. We have CPI, we have PPI numbers, we have comments from Fed Chair Powell. Where do you want to start? Oh, Dylan, just when you thought perhaps the data would give us some direction for interest rates, we get contradictory information this week. Interestingly, the market seems to have shrugged it off Friday, very strong market. But let's break it down a little bit. Friday's wholesale price

metric, which the producer price index, or PPI, rose more than expected in June. That's basically a negative indicator, unless you're a big fan of inflation. The PPI was up 0.2% last month. It was expected to be up only 0.1%. Over the last year, it's up 2.6%. So we're doing pretty well relative to a year or two ago, but this was a so-called hotter than expected report, and the May number was also revised higher. Now, that contradicts the number we got earlier in the week, which is consumer price index or CPI, and that showed that headline inflation declined on a monthly basis and now sits at 3% year over year. That was the first time since May 2020 that the monthly rate showed a decrease. Now, just in case you're not sick of inflation metrics enough, the Fed's preferred

inflation metric is the personal consumption expenditure price index, and that will be released on July 26. So everyone hold your breath. I know you can't wait, but July 26 will be here soon enough. I love the thought of someone being a fan of inflation. Yeah, you know, painted chest, sign at the arena. Absolutely stoked. Ron, so if we look in a vacuum at the inflation side of the Fed's dual. mandate, what does it portend when it comes to potential rate hikes or rate decreases?

Well, during the week, Powell said, Fed Chairman Powell said, you know, rates will likely go lower. I don't think there's any misinterpretation about that. It's a matter of when and how much. And he signaled, hey, don't get used to where we were between the financial crisis in 2008 and the pandemic when rates were close to zero or zero. It's unlikely we're going to get back to that. If you would ask me during the week, if rate cuts were coming, I would have said after CPI came out, I would have said likely in September on Friday when PPI came out hot. I'm less sure. Markets are still indicating futures are still indicating that there will be a cut in September, one of potentially two or three, maybe this year. We'll have to see how the data continues. But rates are likely

going lower, but they will stay higher than we have been used to over the last decade or two. Zuming in on some of the comments from Fed Chair Powell, one thing that jumped out to me and seemed like a little bit of a tenor shift this time around, Ron, was a focus on the employment side of the Fed's mandate. Talking about here, elevated inflation is not the only risk we face. And Powell going on to say reducing policy restraint too late or too little could undo. duly weaken economic activity and employment. We've been talking so much about the inflation side of this. Jobs are coming into focus here, too. Yes, the dual mandate, if they only had to worry about one thing or the job would be significantly easier, but they've got to worry about both.

Unemployment currently 4.1%. That's ticked up from the threes over the last year or so, but that's what they want. The Fed is trying to slow the economy by keeping rates higher. So don't be surprised by that. Labor has been pretty good. Four point one is still pretty much considered full employment. So that's pretty good. And inflation coming down at the same time, they may have just engineered that soft landing that they're hoping for, time will tell. When you hear things like this, Ron, one of the things that's really important to note about the Fed is that they don't have like a plasma knife. What they have is a giant sledgehammer in terms of bringing liquidity in or out of the market. So one of the things that they are doing is

they are predicting what the market is going to be when any of this liquidity added or subtracted matters, which tends to be six to nine months after the move. So they really are trying to bend their headlights around corners. I would really like to see a plasma knife from the Fed. I don't know what it would look like as a monetary instrument. I don't even know what it is. It sounds good. It sounds interesting. I'm here for it. It's very precise. We had comments from Fed Chair Powell. We also had comments this. week from J.P. Morgan, CEO, Jamie Diamond. We tend to pay attention when he speaks, Bill. What did you see in the commentary from Diamond? Well, he did say that he saw the inflation coming down,

but he has made a point, and he's made this a couple of times before, that there are inflationary forces in front of us, including fiscal deficits. And one of the things that he really pointed to was the restructuring of trade. And one thing that we have to remember is that we have benefited. And I don't know, not everybody has benefited, but we as, you know, financially have benefited from being able to essentially export inflation to China over the last 40 years. And one of the things that Jamie Diamond has pointed to is those days are over, both from a geopolitical standpoint and from the fact that China is simply not the cheapest manufacturing environment anymore. So we don't get the benefit of being of lower prices by virtue of selling out of China.

And he's pointed to that in the past. He's bringing it up again because I think that he's, you know, he's saying we need to recognize the fact that the game has absolutely changed. One of the other things I'm noticing just tying Diamond's comments and Powell's comments together here a little bit, Bill, is the scope of considerations is getting larger and larger. and we are starting to kind of put more of the overall economic machinery into focus as we're looking at rate outlook as we're looking at economic outlook. It's not just a matter of inflation anymore. Yeah, it's not just a matter of inflation anymore. And, you know, I almost don't know how to think about this except to say that Jamie Diamond and Jerome Powell are pretty smart people.

So maybe we should assume that they know what they're talking about here. But Jamie Diamond is the one who is probably most credibly, you know, ringing the bell that, hey, look, all of the money that we have poured into the federal balance sheet, at some point, that has to be paid off. It has to be maintained. And we really should have an open conversation about it. In addition to the commentary from Diamond, we also got some updates on the earnings results from JP Morgan and other banks, well as Fargo and C. city. Ron, you did a dive into those results. What jumped out to you? Yeah, they all kind of started coming out on Friday, and some were better than expected, but I think my feeling is overall they were generally not that great. J.P. Morgan's quarterly profit fell. That is excluding some one-off gains from their stake in visa, but their operating profits fell. And that's

even as their revenue was higher than Wall Street's expected, and they had a really nice jump in investment banking fees. If you move over to Wells Fargo, they had to cut their annual outlook, their profits slipped as well. They're blaming net interest income being down and short of expectations. Now, City was up 10%, not too bad. Interestingly, I don't think of Citigroup as a strong investment banking presence, but their investment banking numbers were strong, and that helped them post higher profits. They focused on the fact that investment-grade bonds. issuance was strong, a rebound in the IPO market, although it's still not where it has been in past years. Merger activity is somewhat robust that helped them as well. So kind of a mixed bag,

but overall, I would say the markets and myself included were not that impressed by the results. Some of it, though, Ron, has to do with the fact that the large banks have had a really good performance from the stock market this year, particularly as you compare them to the mid-sized banks than the smaller banks. And I think some of that has to do with still blowback coming from the Silicon Valley Bank collapse last year in which one of the themes that came out from it was, hey, you're actually maybe taking more of a risk with your deposits and you thought. And one of the easiest ways to alleviate that risk is to concentrate your deposit franchises on the larger banks. So they have benefited, I think, in an outsized way from the crisis from last year.

All right, coming up after a quick break, an acquisition shows that AMD is gunning for NVIDIA and its AI opportunity. Stay right here. You're listening to 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,

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Welcome back to Motley full money. I'm Dylan Lewis here over the airwaves with Bill Mann and Ron Gross. Chipmaker AMD went shopping this week and scooped up Silo AI, a private AI, Lab based out of Europe. Bill, they're going to be paying $665 million in an all cash deal for Silo. What exactly are they getting here? Why are we even bringing this up? A $660, okay. I mean, you wanted to bring it up. It was your idea. Yeah, that's good. Take us into the production process here. You were the one, Bill, who raised this as the topic you wanted to hit this week. We're talking about a $665 million deal for a multi-hundred billion dollar company.

AMD is massive. But here is why this is important. AMD has been trying to catch up in the GPU business with Nvidia. And it hasn't ultimately up until now been about creating a better GPU because Nvidia has a proprietary software platform called CUDA that everybody defaults to in this, in this business. So AMD bringing in silo AI is essentially trying to get to the whole product. stage where they too will have an internal development platform to go along with their GPU.

So yes, that's exactly why we're bringing up. And I resent the question, Dylan, because this is a big deal much bigger than the amount of money that they paid. So if we are to pay attention to the important elements of this story bill, it is, I think, that there is a focus, an increased focus on not just the hardware that enables AI, but the software that is layered on top of it that makes it even more useful? Yeah, and it's not even just that. It's that if you have, if you have hardware and software and they operate within a single environment, it's inherently more valuable for the programmers themselves. So AMD,

obviously Lisa Sue, one of the best CEOs in, in, in, in the, industry has long seen this as something that they really needed to to forge and get to the other side in order to take on what is essentially a monopoly with Nvidia. All right. Over to the friendly skies results in from Delta this week. And the market didn't exactly love them. Shares down around 5% this week. Ron, what was in the results?

Yeah, you know, despite record high quarterly revenue, the fact that they may. on the earnings side, really sent investors heading for the hills. And the main culprit is discounted airfares. And there are pressuring earnings really across the board. There are just too many seats now in the U.S. market as a result of the post-COVID frenzy to increase capacity. And higher fuel costs also aren't helping. They're hurting margins as well. The main issue is that as the COVID-19 pandemic ended, airlines try to catch up with travel demand by buying planes, hiring staff, increasing flight plans, and now the supply of seats just exceeds the demand for them, and thus you have discounted domestic fares, and that hurts margins.

So for the quarter, Delta was up 5.4% on the revenue side. They are focusing on high-end offerings, lounge access, better seating that is paying off for them. Those things are now a significant piece. Over half of Delta's revenue comes from those sources, such as loyalty programs and premium ticket sales. but they're earning less money per seat flown each mile. Adjusted earnings were down 12% a result of those margin problems. CEO said they are taking pretty significant corrective action across the board, across the industries.

Summer travel looks very, very healthy, he said. They did reiterate full year guidance. Training is seven times, right? But the industry is also four or five times. So it's probably the better of all of them. Seven times sounds really cheap. but buyer beware when it comes to airlines. Have you guys flown this summer?

Yes. Here's what I want to know. Are these cheaper seats in the room with you now? Because I certainly haven't seen. They aren't for me, Bill, but I'm also notoriously a last-minute traveler and last-minute booker. So I don't know that I'm the right benchmark for that. Fair.

That sounds like the perfect thing, though, for us to throw out to our listeners and get some boots on the ground reporting podcast. SetFool.com is where you can send those stories about your own fares. All right. Bringing us home for this segment, it's been a good run, but even Costco is raising its prices. The ultimate sign of the Times, Ron, the company announcing it will be raising the price of its membership for the first time in seven years. Gold Star members will go up $5 to $65.

Executive will go up $10 to $120. Did you see this one coming? Yes. It's been on the radar for a while now, so certainly no surprise. As a consumer, I'm okay with it. As an investor and an owner of the stock, I'm absolutely okay with it. It's one wonderful thing about the Costco business model, that they do have pricing power to continue to increase these management fees from time to time. About 56% of Costco's operating profits comes from membership fees, not selling, you know, 200 pounds of licorice or whatever your favorite thing is at Costco.

It used to actually be higher. It used to be maybe 75% of operating profit came from membership fees. And this hike will get that higher once again, maybe not back to the 70 or 80 mark. But it's a wonderful business model. As long as they keep us happy by giving us value priced items and keep us coming into the stores and keep us paying that membership fee, that accrues right to the bottom line. and it's a wonderfully run company. Costco's a perpetual motion machine, if you think about it.

Their membership was $25 in 1982, and today it's $65. I defy you to find a slower rising price anywhere in American commerce. So this is a company that focuses so intently on the customer. There are lots of companies that claim it, but Costco lives and breathes it. So think about their $1.50 hot dog special and how it's never gone up in price. Costco probably loses money on that, but they make up for that choice by looking at a fast turnover item with ultra-thin margins and recognizing that it requires creativity. So where else do these sorts of things matter? Costco is one of the best deals out there for the consumer.

Stocks been up a lot this year. I like the price rise. Bill, do you think there would be more outrage if they increase the price of the hot dog rather than the membership? A hundred percent. Certainly in the media. Absolutely. People are watching that so intently that if that ever happened, I mean, there would be, I mean, first of all, there would be, you know, there would be warfare in Costco headquarters. But yes, it would be a big deal in the news, too.

I would be remiss if I didn't mention that the shares are now trading it 50 times forward earnings as a result. of the wonderful increase in the stock price over the last year. You know, we've been saying it's expensive at 30 times, at 40 times, here we are at 50 times. It's one of my largest personal positions. I haven't sold any. Makes you wonder what returns can look like if we're at 50 times now. I think it's worth thinking about. I just happen to think it's one of the finest run companies in America.

And I'm happy to be a shareholder. If you look at the numbers, you start to wonder at, what price. Yeah, I don't know that there's a huge opportunity in Costco now, but there's probably no other company at this valuation where you would be more confident with, okay, they're going to grow into it. And I think in general, given everything we laid out earlier in the show, focusing on quality businesses, ones that consumers love, probably a good place to have your money at this point. That works, yes. All right, Bill Mann, Ron Gross, fellows, we're going to see you guys a little bit later in the show. Up next, we're heading into the vault for a very special interview to kick off this

summer's Fool Fest celebration. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Full Money. I'm Dylan Lewis. This summer here at The Fool, we're returning to a time-monored tradition, Foolfest. This Sunday through Tuesday, we'll be with Motley Fool members here in Washington, D.C., talking stocks and learning a little bit about how the world works and where it's heading. This year's Fool Fest is a particularly special one. We're celebrating our 10th. As part of the pre-event festivities. This week on the radio show, we're revisiting one of the interviews from that first Fool Fest back in 2014. It's Motley Fool CEO, Tom Gardner, and author Malcolm

Gladwell, talking through his book, David and Goliath and pulling lessons out that we can borrow as we look at small disruptive businesses and whether Titans can continue to hold their lead in major industries. Malcolm, what would be great is just to have you start by, first of all, thank you so much for coming and spending time with us. Just outline the overall premise of the book. Well, I was interested in a book in describing in asymmetrical conflicts, or more generally in this notion of is our understanding of what an advantage is accurate. And that's the theme that runs throughout the whole book.

So if our understanding of what an advantage is is so accurate, why does the weaker party in a war win as often as it does? Because the weird thing about, if you look at histories of warfare, is that the quote-unquote underdog, the much smaller party in any kind of conflict, wins an astonishing number of times, which suggests that maybe we're fixating on the wrong variables in explaining conflict.

And then I run with that idea and talk about schools and education and dyslexia and all kinds of, kinds of entrepreneurialism and all kinds of things along those same lines, wondering whether our kind of intuitive accounting of these things is accurate. What I want to do now is search for patterns in your work, in the book, that might overlay nicely to looking for disruptive, smaller companies that might succeed when we make the assumption that Microsoft will, of course, squash every business that gets in its competitive space 15 years ago and then that doesn't end up happening.

Or we assume that Apple must win because Apple is of the size and scope that it is today. So we're going to look for more disruptive companies, smaller companies, and see if these principles help us find them. Number one would be occupy a spot off the beaten path. So maybe the story of the Impressionists and the Salon. Yeah, yeah. Yeah, so the Impressionists are a really interesting group. they come along at a time in the art world

where in Paris, in France, where there was something called a salon, which was the big art show every year. And what every artist did was they competed to get accepted into the salon. And the salon was very conservative and had very strict ideas about what was an acceptable painting. And the impressionists were doing something radical. And they faced this choice of,

should they try and get their paintings into the salon, which would mean they would have to dumb them down and make them more conventional. Or should they go off on their own and give up all of that prestige and do their own thing? And they decide to give up on the salon and do their own thing. And they start their own little show, which in the beginning no one goes to, which is just in a little upstairs in some little room.

And that ends up being the greatest thing they ever did because they privileged the freedom to do what they wanted over conforming to a... as it turned out, dying set of standards about what art represented. And that is a tried and true principle for revolutionaries. Before you can challenge the status quo, you need to leave the status quo. You need to find a safe haven where you can pursue what you think is the right answer, free of the deadening constraints of conventional thinking.

Warren Buffett, Omaha, Nebraska, leaving New York, unable to get a job in a way in New York City and goes off to Omaha where he can carve his own space out. A little bit of the IKEA story in Poland. Yeah. Oh, yeah. Well, I love that story. Yeah, Ingevark-Kamprod, who has this brilliant idea, which is if you make furniture and don't assemble it, you can ship it flat.

You can save on assembly in the manufacturing line. You can ship it flat and save on shipping and sell it for much less. And then he gets shut down in the late 50s by his competitors. He's basically blacklisted in Sweden and facing bankruptcy. And he has a second great idea,

which is Poland, across the Baltic Sea, right? Really, really cheap labor. Lots of trees. you know and IKEA is and communism yes in communism he's able to pull it off

to build up it's an extraordinary story of how he manages to build his first plant in Poland because it wasn't easy to build a modern manufacturing facility in communist Poland in 61

but it is that notion that he had to and also he goes to the it's the height of the Cold War and he goes to the enemy it's like going to North Korea today essentially it's the same thing But he is so convinced of his vision that he's basically of his business model,

that he's willing to thumb his nose at everyone and leave the country where he, you know, where he came of age. He's never really gone back. So third factor, you don't overplay your greatest strength. I've phrased it that way from your discussion of, the inverted U-curve and maybe explain that concept and see if that's a, should a David, even though he has a strength, not think about overdoing it, or is it he's still on this side of the U-curve and should be anchoring hard on his strength as far as he can take it? Yeah, the inverted U is a chapter where I talk about how, I think, one of the kind of mental

models we use to describe relationships between resources and outputs is really leads us astray. So we have this notion that if a little bit of resources, money, makes the problem better, then a lot of money will make the problem best of all, go away the most. And the answer is no, in most of the things that we, of situations where we look at relationships between what you put in and what you get out, the curve does not look like that. The curve looks like that, or rather the curve looks like a you. that in the beginning things get better and then they flatten out and then they get worse.

So I use the example of class size. It is absolutely the case that if classes are very large and you make them smaller, kids will do better. But then there's a long stretch between probably the high 20s and the low 20s where you could make a class smaller and you will see no effect on kids' performance. And if you go too far below 20, kids are worse off.

There's really interesting and compelling evidence of this, that it is not a good thing for a child to be in a class with 14 children, 14 other students. One, you cannot get a discussion going with 14, not enough voices in the room. Two, one bad apple can totally ruin a small class because there's nowhere for that person to hide. Right? You can't. And thirdly, that children who are struggling, what they need most of all is not more attention from the teacher. What they need most of all is another person, a peer, who is learning at the same pace as they are, so they don't feel marginal and isolated. You need to have someone who's asking the same questions, struggling with the same problems.

If a class gets too small, the struggling kids are just wiped out. And that's something, you know, a lesson that is so routinely violated. You know, I made fun of expensive private schools in my book, because I'm sorry, they deserve it. They take $50,000 of your money and they boast to you that your kid is in a class with 12-00 students. Whoever said that's a good thing, right?

All they're doing is justifying the fact that they took $50,000 and they have 20 Steinway pianos. That was the Hotska school. I thought brilliantly pointed out that a school like that is often serving its primary customer, which is the parent. Not actually the outcome for the student, It's to impress the parent that we have the very best of every piece of equipment times 10.

Where is it written? I even find the whole notion that the point of a classroom is to maximize the attention that a student gets from a teacher is insane. A student has to go through extended periods where they are forced to solve the problem in front of them by themselves. That's called life, right? the teacher should be there for when you are truly stuck and also should be there to get you to the point where you can solve it on your own. It is not a good thing to have a teacher hovering over your shoulder at all times. That's debilitating.

So it goes to this idea that too much, we sought to make the mistake where we push our use of resources well past the point where they are useful. There's a business writer named Les McKeown, and he was the first person to make me see that a company with too much cash that can be a weakness. Oh, yeah. Because, of course, when as an investor, you're thinking, well, at least I know they've got this huge safety net

of billions and billions of cash set aside. But in fact, one of the lines from the Oak Wealth, you know, shirt sleeves to shirt sleeves in a few generations that having too much money actually can create a lot of problems and bad incentives inside that system. I'm convinced this is at the heart of the R&D drought in Big Pharma. I think that they have overspent on R&D. I mean, if you compare, if you look at it, it's really fascinating.

So we know looking over the last 25 years that the bulk of innovation in the pharmaceutical arena has come from smaller biotech companies, right, who are spending over the course of developing their products, a fraction of what the big companies are spending. And the reaction of the big companies, of big farmers to that problem, is to spend even more money, as opposed to asking what happens when,

does having virtually unlimited resources available for R&D change the nature of the questions you ask and change the nature of the strategies you pursue and change the nature of what you consider to be a worthwhile product? And I think that a lot more time should be spent on wondering whether they have gone too far when it comes to... One last David principle that we might apply to looking at leaders and companies,

they truly have nothing to lose. Yeah, I mean, I'm always really interested by the kinds of, the difference in the strategies that you pursue when you are in a position of relative strength and when you are in a position of weakness. And there is a marked difference in, we know that. We all know that intuitively, that when our backs to the wall,

we consider a wider range of options than when we're in a comfortable position. And that means, you know, that means, it's what we all know, that a cornered rat is a very, very dangerous opponent, not that struggling companies are rats. We have to close to let you get on your way, but could you just close by sharing a little bit about how you think about, how we should think about our disadvantages in life? Anyone in the room that sees, I have this weakness, I have this flaw, I have this thing that's held me back or this shortcoming. Or I see it in my child. I see them struggling with this. How should we think about disadvantages?

Well, as, you know, it is a cliche, but they, as learning opportunities, there are, you know, you can learn by capitalizing on your strengths or you can learn by compensating for your weaknesses. The compensation path is far more difficult. It's far more rare, but it's way more powerful. The things you learn as you are working around or through adversity are lessons that are far more deeply felt

than the things you learn because of your strengths. And so, you know, I chose dyslexia in my book for a reason because there are just so many examples of people who refuse to deal. That is just about the most serious impediment you can throw in the path of a child. And the idea that there are lots and lots and lots of really, really successful people who when faced with that impediment at the age of six and seven,

just were undaunted by it and just went about there, just found another way to kind of go about the business of getting through school and then ultimately through life. That to me is such a beautiful example of how we radically underestimate our ability as human beings to deal with, to deal with adversity. I mean, I think we're much better at it than we think. In fairness to the Goliaths. Microsoft and Apple have continued to win over the past decade by pushing into new nascent markets like the cloud and subscription services, but David has logged a few major victories to. Companies free of the status quo like Tesla and electric vehicles, Netflix and streaming, Adobe and Salesforce in Software as a Service have all transitioned from David's to Goliath in

their own right since this conversation happened at our first Fool Fest back in 2014. And we think many more Davids will come in the next decade. Listeners were excited to track them and bring them to you here on the show. Motley Fool members, you can catch the conversations from this year's Fool Fest on our premium site and podcast listeners. We'll be bringing some of the highlights and interviews from Fool Fest like Kava CEO Brett Shulman and Morgan Housel. Here to you on Motley Fool Money. Coming up next, we've got Ron Gross and Bill Mann coming back to bring us a couple stocks on their radar.

Stay right here. You're listening to Motley Full Money. As always, people on the program may have interested. in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Dylan Lewis, joined again by Ron Gross and Bill Mann. The week is coming to a close, gentlemen, but our work is not going to wrap Friday afternoon. We're going to be meeting up with Motley Fool members this weekend at Fool Fest in Washington, D.C., keeping a long-held tradition moving forward.

Ron, we got members coming into the city. What are you most excited about? It is so wonderful. One or two times a year we actually get to hang out and talk with and present to our members. And it's literally energizing. It's so wonderful to see everyone. Some faces year after year after year. You see the same folks and catch up. It's almost like seeing family at a family reunion.

It's always a wonderful time. Bill, what about you? My wife all the time makes fun of me because I describe people as my friends who I've only met like online through the Motley Fool until we get to the Fool fest, right? Like if you're not part of that environment, maybe it sounds a little bit weird. But yes, we are seeing people for this one event a year that we truly love. And Ron's exactly right. It is, it's so energizing to be able to interact directly with our friends, some of whom have been with us now for 20 plus years. It's going to be great. We have the members coming in. We also have some of our contributors and

some of our fellow analysts and fools from all over the country coming in. It's going to be a really awesome time. We'll be taking some of those conversations and airing them here on the podcast over the next week or so. So if you're not at Fool Fest, you'll be able to get some of the content too. All right, let's move over to stocks on our radar. This week, we've got the OG engineer of Motley Fool Money, Steve Broido, behind the scenes, and he is going to be the one hitting you with a question. Ron, you're up first.

What are you looking at this week? Steve, I've been hearing a lot of talk about elf beauty. ELF, which I know nothing about. So I decided to take a look. I think I might actually like what I see. They specialize in cosmetics and skincare. ELF is eye, lip, face makeup. They do it at a really attractive price point.

They're capturing market share from lots of the bigger players. They're growing really significantly. Last quarter sales jumped 71% year over year. They use viral marketing, affordable pricing. And as I said, they're really gaining. market share pretty significantly. They see opportunities overseas. They're growing very quickly there.

Now, trading at 61-time forward earnings. So, you know, growth better continue at a pretty significant clip there for a value guy like me to really be interested, but it looks interesting to me. Steve, a question about elf beauty. You bet. There's a big movement in skin care to move it all online. So you're subscribing a subscription service. Is this in Elf's future to be a subscriber of Elf's product?

From what I understand it is in their present and their future in a big way, yes. All right, Bill. What is on your radar this week? A company that I've liked for a long time, Charles Schwab in 2023 was one of the, one of the latent victims of the collapse of Silicon Valley Bank, where people naturally went and said, okay, who's next? And Charles Schwab suffered from something called cash sorting, which basically meant people had all their money at the broker sitting in non-interest-bearing vehicles,

because why bother there was no such thing as interest, and have moved it. So Charles Schwab is in a much better place now, but the stock has not fully recovered. So I'm really interesting to see they report on Tuesday. They've been showing net new increases in assets. That's money coming into the company. So I'm really interested to see the developments at Schwab. Steve, a question about Schwab, ticker S-C-H-W. You bet.

Do you think there's any regret around fees and eliminating them? No, they do make it up elsewhere. They make up a lot of volumes. They make it up on volume. They make it up on volume. Exactly. Thank you. That absolutely is the case.

You know, holding on to those cash assets really matters. All right, Steve, make up. up or make it up on volume. I'm going with Schwab making up on volume. All right. That's going to do it for this week's Motley Full Money radio show. Appreciate Bill and Ron being here. Steve, appreciate you weighing in. I'm Dylan Lewis. Until next week, thanks for listening. We'll see you next time.