Motley Fool Money - The Bull Market’s Historic Run Is Still Going

Episode Date: August 24, 2018

Target posts its best quarter in a decade. Alibaba drops despite a strong 1st-quarter report. Pepsi buys SodaStream. Gap struggles with its namesake brand. Investors put sports retailers in the penalty box. And Lowe’s hits an all-time high. As we officially enter the longest bull market in history Jason Moser, Matt Argersinger, and Ron Gross analyze those stories and share why the future looks bright for investors.  Plus, journalist Sarah Kessler talks about her new book Gigged: The End of the Job and the Future of Work.  Thanks to Away for supporting The Motley Fool. Go to awaytravel.com/fool and use the promo code “fool” to get $20 off a suitcase! Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's AwayTravel.com slash Fool and use the promo code, Fool. Everybody needs money. That's why they call it money. The best thing, baby. Fool Global Headquarters. This is Motley Fool Money. It's the Motley Full Money Radio Show. I'm Chris Hill.

All, joining me in studio, senior analyst, Jason Moser, Matt Argusinger, and Ron Gross. Good to see you, as always, gentlemen. Hey, hey, hey. We've got the latest headlines from Wall Street. We'll dig into the gig economy with journalist Sarah Kessler. And as always, we've got a few stocks on our radar. But we begin with the now historic bull market. This week, the bull market hit the mark.

Maddie. And hit it. 3,453 days old, now officially, the longest bull market in U.S. history. How are you feeling? I feel good as a guy who recommends stocks and buys stocks and owns them for a long time. It feels great. What I guess doesn't feel so great about it, though, is that we've been at this for nine and a half years, and as we're taping this show, the S&P 500 is an all-time high.

It's about 330% from that March 2000 low, which is remarkable. Love that. More than quadrupled. But I don't feel like a lot of, there's just not a lot of love. We talked about this earlier in the week. There's just not a lot of love for this. this stock market, and it's the most unsung, I feel, bull market in history, and a lot of people just haven't participated in that. If you look at the numbers, it bears it out. The market's quadrupled,

but as investors have essentially been net sellers of this market all the way up. As someone who obsessively looks at his portfolio, it has been quite enjoyable to see it go up and up and up and up. I don't recommend doing that, but hey, that's what I do. So then the question comes. So now what? How nervous should I be? What should I do? I never recommend timing the market in the true sense of the word meeting, selling all your stocks, paying taxes, hoping you get back in at the right time. It's a loser's game. It's really, in my opinion, impossible to do. So therefore, what do you do? I think you make sure you're happy with what you're invested in, which you should always do. You have some cash on the sidelines for a rainy day, especially

the money you need over the next three years. That should never be invested in the stock market. And, you know, I'm personally not committing any meaningful new cash to stocks at this point, except for my typical 401K contribution, and I'll wait out to see what happens. Jason, to that point run, made about market timing, there is absolutely a cottage industry of people out there who are banging the drum to get out of the market. The crash is coming. What do you say to people like that? Well, I think I can say with 100% certainty that at some point or another, there will be a market crash. And we're going to be a part of it.

I can't tell you when it's going to happen. And frankly, I don't really care. To me, the best time to invest is always now. I think three years ago, we had people that were beating the drum about this next correction. And the stocks were getting ready to tangy. This was unsustainable. And if you sat out on the sidelines over the last three years, you're feeling pretty badly right now because you missed out on a lot of wealth creation. So, I mean, to me, this is just a great example of why you always want to be investing.

And perhaps it is a time where you want to be a little bit more particular about individual stocks. But to Ron's point, if you have a job, you need to be contributing to that 401K. And that is the whole point. Doing it in the good times and the bad, we view ourselves as net buyers of stock. We want to buy more than we sell, taking that 5, 10, 15-year time horizon there. It ultimately all depends on what your goal is. but for most of us, I think it is to prepare ourselves for our financial freedom later in life. Yeah, just to add, Jason's right.

I mean, the drumbeat for the next bear market has been beating every year for the last nine and a half years. And I think if you're an investor out there who keeps saying to yourself, I can't get in now, I mean, the stock market is all the time high, I can't do it now. But to Ron and Jason's point, if you just average your way in, if you put money to work regularly, monthly, quarterly, whatever it is, don't commit all the money at once, but just go in, you'll do just fine. All right, let's get to some earnings. Target's second quarter profits and revenue came in higher than expected. And Ron, same store sales growth, the best in 13 years. Is it okay that I'm happy for Target?

Absolutely. That's not really analytical thing to say. But, yes, comparable sales, the best quarter results in more than a decade with strong, store-only comparable sales of 4.9%. And digital sales up 41%. Revenue, strong. Margin's slipped a little bit because there's some higher costs for digital fulfillment. I think that's to be expected, but profits up 20%. The company, you know, has Brian Cornell, has really been making a concerted effort to turn a lot of this business around

by making investments to redesign stores and to boost their supply chain and their technology and their online sales. And it really appears to be bearing fruit right now. And I'm really pleased to say it. I'm pleased to see it as well. I'm not a target shareholder, but I'm pleased because, Brian, Ryan Cornell has been, as you said, he's been very strategic. When you think about some of the decisions that he's made to pare down some of their businesses,

to get out of the pharmacy business and sell that to CVS Health, it really has paid off. It's paid off. They acquired a grocery startup shipped to bolster that side of the business. They've been very strategic. Committing capital sometimes to turn a business can be a dicey proposition. It doesn't always work. So far, this looks like it's working. Yeah, I don't frequent target all that often, but we were in one the other day.

and our local target, I noticed a couple of things. They had renovated the store, so it looked a lot nicer. But also, they got rid of this Grody Pizza Hut snack bar that was at the front of the store. And they replaced it with a Starbucks. And so I think they're kind of getting with the times there. I mean, the Starbucks, the traffic was, it was a line going out into the aisles of the store. So I think looking at this in-store experience and improving that always helps. And it sounds like they're making some good steps there, too.

Ali Baba's first quarter profits and revenue came in higher than expected. Help me understand this, Maddie, because, I mean, their cloud division is growing big. They're putting up big numbers. They're a behemoth. The stock's still moving south. It is. I think there's a larger story here about Chinese tech and four listed Chinese companies in general. I mean, Alibaba's not the only one.

Alibaba down 19% from its 52-week high. If I look at Baidu, down 23%. JD.com down 38%. And 10cent, down 26%. And these are not your fly-by-night companies. These are massive platforms. Lots of growth. If you look at Ilybaba itself, the core e-commerce business there was up 61% in the quarter. That's an acceleration of growth that they had earlier in the year. And they have 634 million monthly active users last quarter. They've grown that

number by 105 million users of the last year. And you mentioned the cloud computing business, up 100%. I just think there's such a negative sentiment for whatever reason. Maybe it's the trade tariff talk. It's the U.S.-China trade war that we keep hearing about. Maybe that's causing it. But at some point, these massive Chinese companies, which are so dominant, got to get some love. And they're not getting any right now from the market. Do you think maybe, if you look back a year ago, was Alibaba's stock maybe a little overheated where you looked at and you thought, well, this seems kind of pricey, because that, in addition to the trade talk, would help me to understand why it's been down.

I probably, I think probably investors, the stock, you know, the stock hit an all-time high, and the growth was starting to slow down a little bit. But what you've seen is a reacceloration. The company's made a tremendous amount of investments that are starting to pay off, certainly on the revenue side. And so I think now things have sort of reversed. I mean, the stock's a lot lower. Growth is a lot higher. It's looking pretty compelling. Lowe's second quarter, as expected, was not quite as good as Home Depot's second quarter. But you know what, Jason? It was good enough to push the stock up 10% this week, and Lowe's shares hitting an all-time high.

Yeah, it was a good quarter. order, and guidance going forward perhaps was a little bit light. But I think really the headline of the story was new CEO, Marvin Ellison. He went in very prepared for this call, and he painted a very believable picture of success for this business in the coming years. They're talking about things like simplifying the organizational structure. We heard that Omnichannel word mentioned more than once, rationalizing the supply chain and inventory management.

And also, pulling back on needless expenses and really, really whittling down that expense structure for the business going forward. So, I mean, we already know that this is a very strong market opportunity and home improvement. We see that quarter in and quarter out with Home Depot and Lowe's always kind of running the second fiddle there. To me, I mean, we know there's going to be a large population of homes in the coming years that are going to be needing that home improvement. And so I stand by what I've been saying with Lowe's. I think that when we look over the course of the next five years, I think both Home Depot and Lowe's are poised to win.

But I think because Lowe's has always played second fiddle and the markets kind of attach that multiple there, I think the opportunity for investors is actually more in the Lowe's side right now as opposed to Home Depot. Question from listener Aaron Kelly. I always hear you guys talk about Home Depot and Lowe's. How do you feel about Midwest up-and-comer Menards? I know it's private, but it is gaining traction quickly and growing like crazy. an IPO in the future. I'd love to hear your thoughts on the show. Thanks for the question, Aaron.

I was unfamiliar with Menards. They've got over 300 locations across the Midwest. Well, I was unfamiliar too, Chris, but then I did a little Google foo, and I found out a little bit more about the company. And this is an interesting concept. They're actually beyond just home improvement. I mean, they sell groceries and mattresses and stuff out of there. It's basically seen as the third player in this space, based on size, bringing somewhere in the neighborhood. neighborhood of $8, $9 billion in revenue. If it went public, you'd see this thing in about $10 billion market capitalization, still much smaller than Home Depot and lows. I don't think they want to go public, though. The market can be just ruthless on retail IPOs. And this is a family-run business. My bet is, much like Wegmans, they want to stay out of that IPO spotlight and just keep it family-run and private. I can get groceries and tools.

That seems odd. I mean, there's a lot to be said for that. Yeah, I don't know. It sounds like food and stuff. Food and stuff. You can get food and stuff. Perhaps they give Max beloved Costco a run for their money. Don't tell him that. Pepsi CEO, Indra New Ye is stepping down in October, but she is going out with a $3 billion mic drop.

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Chris Hill here in studio with Jason Moser, Matt Argusinger, and Ron Gross. Second quarter profits for the Gap came in higher than expected, thanks to Old Navy and Banana Republic. So, Ron, it appears that once again the weak spot in Gap's business is Gap. And it seems like it will be for quite some time. They continue to just have inventory problems and they can't get it done. Comp sales down 5%. And this is the same old story. I feel like a broken record.

whereas Old Navy, just the opposite. Comstales up 5%. The one difference, I would have to say, Banana Republic, was a little bit better this time around. You saw Comsdale's up 2%, which is a really nice improvement and had been negative relatively recently. So that's pretty good. The guidance is basically the same. They think they'll still come in where they thought they would at the beginning of the year. But they continue to struggle. So what is one to do? Do you pair back the Gap Store footprint? and just focus on the old Navy brand into a lesser extent in a Republic. Perhaps the answer to that is yes. Well, and when you look at the stock down about 9, 10 percent this week, it's still up over

the past 12 months. Still up, and only at 11 times earning. So if you're one who wants to take a little retail gamble, it might not be too bad if you think they're going to make the right moves. Shares of Toll Brothers up 10 percent this week after third quarter profits for the luxury home builder came in higher than expected. Last week, Redfin's CEO came out and said that buyer demand is waning. Doesn't seem like Toll Brothers' business is waning.

No, no, it doesn't. And I think that what we ultimately have here is a tale of two markets where home builders are concerned. So, on the one hand, you have pretty strong demand on the lower end of the market. And that's where supply is still somewhat lean. And so that demand then starts pushing prices up, which then pushes a lot of those buyers to the sidelines waiting for prices to come down. and then that inventory doesn't seem so lean anymore.

It can be a difficult cycle to get out. On the other hand, you have high-end builders like Toll Brothers. They're doing really well. Part of that is because the average Toll Brothers home is around $850,000. And they have actually a pretty big sum of cash buyers in their business. They noted in the call that cash buyers jumped to roughly 24% this year versus 20% last year. So when we talk about the more affluent buyer, they're not nearly as sensitive. to economic times, whether good or bad. They just have a lot of cash on the sidelines.

They can kind of do what they want. So to me, it is just a matter of Toll Brothers knowing their customer, being able to cater to that customer and really exploiting the ongoing demand in that part of the housing market. Someone's walking around with $800,000 in cash in a suitcase, just walking up and buying a home? Seems odd, doesn't it? A little odd, yeah. Earlier this week, Pepsi announced it's buying Soda Stream for 3.2 billion dollars. Maddie, a month ago, Soda Stream stock was in the high 80s, and Pepsi is buying

it at $144 a share. So, I guess, first and foremost, congratulations to the SOTstream shareholder base. Absolutely. This was a shocker to me. I don't, I guess I'll just say up front. I don't really get this. And they're a $3.2 billion for Soto Stream. I think in Pepsi's mind, we've got this razor, razor blade model. It's growing. It helps our soda business, which has been struggling. It also, it's a platform that takes a lot of the main costs out of making soda. If you think about water, bottling, well, you have consumers who have these machines at home. They're obviously using their own water. Most of time, they're just using the same bottles. And so those costs are kind of taken out of the equation, and you're still selling soda. My problem is here, I just, I feel like,

in essence, this is cannibalizing Pepsi's existing beverage business in a lot of ways, because the Soto Stream is an open platform. People can use all kinds of beverages, not just Pepsi's. And then you said it. I mean, talk about buying at the top. I mean, yeah, it might have been training in the 80s a few months ago. This stock was trading at $13 just two years ago. So Pepsi is paying 10 times what they could have bought the company for two years ago. It's a remarkable premium. I know we have a couple of them in the office. Do any of us have a soda stream at home? Yeah, we've got one at home. I do as well.

I don't use it, no. I'm not a sparkling water, per day. We have one, and my wife primarily uses it for sparkling water. So let me just push back slightly in this regard. Pepsi's got the cash. Oh, yeah. Sure. We've been critical in the past of Company X comes out and announces that they're raising their dividend, and we asked the question, well, is this really the best idea you have to do with

your money? At least they're being creative. Although on the flip side, Ron, would it have been better for Pepsi shareholders if they just said, you know what, we thought about spending $3 billion on this. We're going to put it towards a one-time dividend. Perhaps. Or buyback stock. I mean, the future will tell if this makes any sense. I agree with Maddie. I'm scratching my head a bit. Yeah, I think that I mean, it's an interesting acquisition. I feel like they just paid way too much. I mean, I am saying it now. I just think within the next two years, we're going to know clearly

whether this works or not, but I think we're going to see a big write-down on goodwill from this acquisition. And, you know, Newy's not going to have to really answer to that. But, hey, that's the way it goes, I guess. Nice being the CEO on the way out, right? If the package goods industry is having a rough time, the sports retail industry is giving it a run for its money in that regard. Foot Locker and Hibbitt Sports, both reporting second quarter results this week and both stocks falling hard on Friday. Foot Locker down 13%. Hibbitt Sports down 29%. Ron, I guess this is where we look back a year ago and see Sports Authority going out of business

and look back and go, oh, yeah, that was a warning sign. Yeah, but I don't think you can just look at the stock to see what's going on here, because I think Foot Locker had a good report, inhibit not so much. Foot Locker results were strong, beat expectations, adjusted net income up 21%. Margins are up. Com sales only up a half a percent, which I think was a bit light, and that's maybe what's spooking some investors. But even with the hit that the stock took this week, the stock is only down slightly for the year.

That's because it had a 30% run in June because the quarter last time was really, really strong. And people thought perhaps they'd solve their inventory problems. They source most of their product from Nike. New Nike products were going to be able to come on board and really drive prices and drive sales. And it does appear to be happening. Hibit, on the other hand, is kind of a mess. They're not profitable. They're losing money.

Sales increases were less than expected. They had to cut guidance. And folks are really just abandoning that stock. Okay. I'll take you at your word that Foot Locker had a good quarter. But in general, when you look at these two, when you look at Dick's sporting goods, which has struggled as well, I mean, this really seems like a very troubled industry. And I'm not exactly sure why. Because it seems like this is a viable business if someone can run it right. Well, and it just flies in the face of what we've seen a little bit lately, which is great news out of Nike, some more positive traction from Under Armour. I think it's just the fact that these companies, the shoemakers are finding other waste, other distribution channels, beyond the traditional sports retailers. Yeah, it's that direct-to-consumer line item you see in every release with these two. They're investing just loads and loads of money in there, and it's becoming more and more a part of their sales going in-quarter-in and quarter-out. So the more they do that, the more

troubled dicks and Hibbit and all those other companies are going to be in. All right, guys, we'll see you a little bit later in the show. Up next, journalist Sarah Kessler talks about the end of the job. and the future of work. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Sarah Kessler is a deputy editor at Quartz, and it's the author of the new book, GIGD, The End of the Job and the Future of Work. Sarah joins me now from New York City. Sarah, thanks for being here. Thank you for having me. So you write about what you call the gig economy. Let's just start there. What is the gig economy and how

big is it? Well, you'd be surprised at how much debate is actually going on around this very simple sounding question. So the gig economy is basically a term, like a buzzwork, that we started using maybe within the last five years. And often people use it to describe apps like Uber, where you press a button and someone comes and does something for you, and that person is classified as a freelancer. There are things like this that will find you a dog walker, someone to drop off your dry cleaning, a house cleaner, an accountant, a lawyer. There are all sorts of versions of that. Some people also, when they say the gig economy, they're talking about anyone who's a freelancer in general.

And that's a much bigger piece of the population. So the app-based version, the best estimates we have is that there's about half of a percentage of the workforce is working this way. When it comes to freelancers in general, it's more like 10 million people, which is a significant amount of the workforce. So one of the questions that is constantly asked about generations in America has to do with essentially how well generations are going to do relative to their parents' generation. So based on the research that you've done, when we're looking at the gig economy, how is that millennial generation doing relative to their parents?

So there are two sides of that question. One, it seems as though a lot of people are doing this in addition to a full-time job or a part-time job, which kind of indicates that there's something about those part-time jobs and full-time jobs that aren't meeting people's needs. The other is, if you're only working this way, you don't have any sort of social safety net or labor protections. All of the things that employees get like lunch breaks and unemployment insurance, you know, maybe health insurance, those don't apply to independent contractors at all. So we do have more people moving into this. It means we don't have that kind

of baseline security that we work to develop around the full-time job. How much of this is being driven by Silicon Valley? Because I know you spent a bunch of years covering Silicon Valley for Fast Company. And it really does see, I mean, you mentioned Uber. Uber seems like it's only the latest company that when they are starting out and they're making their pitch and they're going around to VC firms, part of it has to do with, well, our labor costs are going to be low because we're going to have freelancers. We're going to have people who are doing this as a side hustle. And so we won't have to pay benefits. Yes, it is between 20 and 30% less expensive to use somebody you call an independent contractor

than it is an employee. So that's the big driver of it. In terms of how much Silicon Valley is driving it, this is part of a long trend that goes back to maybe the 70s of companies pushing more and more responsibility onto workers and doing things like outsourcing and hiring freelancers. that kind of put more work in the domain of people who aren't their direct employees. So that's been happening for a long time. What I'd say things like Uber and some of the new technologies are

is kind of an extreme version of this trend. And also perhaps like an early look at where this is going. Without some of this technology, you couldn't use independent contractors or manage them in the ways that they're being used. And so, you know, you might say that technology offers the potential for this trend to grow. Part of what you do in this book is find the people who are actually involved in the gig economy, not just in New York where you are or out in Silicon Valley, but across America. I'm not trying to ask you who your favorite child is.

But when you think about the people that you've met along the way writing this book, what are one or two of the stories and the people behind them that really stand out to you? Yeah, I think that the important trend that I took away from this is that it looks a lot different, you know, depending on who you are. There's not like one story of the gig economy. That is the truth. So, for instance, one of the people who I followed, his name was Curtis, and he was a software developer, a new graduate, really, really bored at work,

you know, didn't have enough to do. being challenged. So he quit his job and joined the gig economy and on one of these apps that routed programming jobs to him. And, you know, he didn't have to do the things that he would have had to do if he were traditionally a freelancer, like advertise or go find clients. You know, they just routed it to him. And it really was, like, the thing that gig economy companies often say it will be, you know, he was independent and had flexible work. He could choose challenging projects. But also, Curtis had saved the years with the living expenses before he started. He had a really highly in-demand skill that paid him really well.

He could afford his own health insurance. His savings allowed him the stability to not worry about if a client left, would he be able to buy groceries? On the other hand, I followed this man in rural Arkansas who had basically found a gig economy job because there weren't a lot of other good options around him. And his job was answering customer service calls for Sears. So if your air condition was broken, you might have ended up on the phone with him. But his actual employment relationship with Sears was that he was an independent contractor

that worked for a small business that had a contract with a call center that had a contract with Sears. So at this point, he has almost no relationship with fears. Like if something goes wrong, they're not going to say that they're responsible for him. And when he has to pay for his own training or not get paid for months when they're training him because he's an independent contractor, his bills are piling up, and it's not like he can do other work. And that's a big deal. Not having health insurance is a big deal. He's worried that he's not being paid fairly.

but he can't complain about it because he knows that there's no wrongful termination laws that protect independent contractors. And so he's afraid that he'll get fired and there's nothing, you know, that he'll be able to do. The company made him commit to working 30 hours a week, but there was no reciprocity in that there'd always be hours available for him. So when the company had a lot of, you know, work that needed to be done, he could get work. But if they didn't, he couldn't. So that's flexibility for the company, not flexibility for him.

And so it really does look a lot different depending on who you are. We talked about Uber. Uber obviously still a private company as a show that likes to focus on public companies. In your observation, what are some of the public companies that are really tapping into the gig economy and transforming how we work? Probably every company uses some workforce that is not as direct employ. The janitor works for another company that contracts them out. They work with freelancers.

They have temp workers. I mean, Microsoft in the 90s was sued because it hired software developers as independent contractors, but basically treated them as employees. So this is a really old story, and I think that apps like Uber kind of demonstrate the potential of this, and they also give us a talking point. But this is something that has been happening a long time everywhere for a long time. What surprised you the most when you were working on this book? The extent to which the stories really were different depending on who you were coming, where you were coming. coming from, but that the pitch was so often the same, you know, there's this mentality about,

like, the hustle culture and, like, being an entrepreneur. That is really true if you are somebody who's starting a small business or a startup, but you also have this huge, you know, potential upside. And that kind of got hijacked and applied to these things that don't look at all, like starting a business or being an entrepreneur, you know, that might be being a house cleaner for a cleaning company that calls you an independent contractor. But still, kind of all the messaging is you're flexible and independent and your mini-business, and I thought that that was really surprising. You're a reporter, a journalist, an editor.

It sort of seems like writing this book was your gig. You kind of did this on the side. This is your first book. So I'm curious, what do you know now about writing a book that you didn't know when you started? Yeah, you're right. Like a lot of people in the gig economy, this is my supplemental income gig. And what I know now is that a lot of work, which I suspected.

But this was many years in the making. And pretty, you know, it wasn't, it was two full-time jobs, not a part-time job and a side project. Where do you think the future of work is going? Do you think it is continuing down this path where, if you and I are talking a few years from now, the numbers that we talked about earlier are going to be double what they are now in terms of tens of millions of freelancers? Or do you think the gig economy has a ceiling? I think that there's always going to be traditional jobs, and just like there's traditional

retailers, but we wouldn't say e-commerce is totally irrelevant, which is now. still, I think, 10% of retail or something very low. I do think, though, that we're setting ourselves up for this to grow if I had to guess. I mean, the fact that companies are so incentivized by the way we've set up our whole system and our laws to hire independent contractors whenever they can, because it makes it between 20 and 30% less expensive, coupled with kind of technology offering new ways to manage independent contractors and find them at short notice and plug them into your work in a way that maybe you couldn't have without the technology.

I think that those two things would make me predict that this will grow. If you're interested in the future of work, this book is absolutely essential reading. The book is gigged, the end of the job, and the future of work, and you can find it anywhere you find books. Sarah Kessler, thanks so much for being here. Thank you. Coming up, we'll give you an inside look at the stop. on our radar.

Stay right here. You're listening to Motley Fool Money. Take this job and shove it. I ain't work any day no more. My woman done left and took all the... Right, before we get to the stocks on our radar, quick shout out to Away. Away makes affordable, high-quality suitcases that charge your phone. And by cutting out the middleman, Away is able to offer the perfect luggage made with high-quality materials at a much lower price.

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to keep it. Away has a special offer for our dozens of listeners. For $20 off a suitcase, go to awaytravel.com slash fool and use the promo code fool at checkout. That's awaytravel.com slash Fool. Don't forget the promo code, Fool. 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, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill, here in studio once again with Jason Moser, Matt Argusinger, and Ron Gross. Guys, before we get to the stocks on our radar this week, our email address is Radio at Fool.com. Drop us an email. Let us know how you're doing, where you listen. And if you want, you can ask a

stock question, like Joseph Hardy did when he wrote, why do stocks move down following great news? I'm currently long, several bio stocks that have moved down following FDA approval. Great question. And Maddie, I don't know a lot about biostocks and FDA approval. Here's what I do know, though. Sometimes approval is not a blank check. Sometimes the FDA says, we've approved your drug, but we've put restrictions on it that you probably weren't hoping for. Right. And I'm going to let our expert, Ron Gross, talk about the bio stocks. But to answer the question, I would just say perception and expectations play actually a much bigger role in the stock market than most investors think. We think good news comes out. This revenue rose up 20 percent for a particular company and they beat expectations.

Great. Stock should go higher. The problem is there's a lot of built-in expectations that suggest maybe the stock investors were expecting revenue to be even higher or earnings to be. even better. And sometimes when that doesn't happen, or especially if a company is rather tepid with their guidance for future quarters of the year, that can play a huge role. So, it's not always the good news. It's really just what investors are expecting. Yeah. And sometimes it can just be what we hear profit taking, right? I mean, a lot of those Wall Street firms are much more short-term focus than we are here. And so they're investing in these businesses to take a bit of a more quarterly approach to things. If good news comes out, they see an opportunity to take some money off the table and take some profits. That's great. They

do that, and it's always worth remembering that when you flood the market with a lot of shares for sale, that typically is going to push that price down in the near term. And specific to biotech, which is truly a beast unto itself. Those rules don't necessarily apply to all regular, in quotes, industries. A lot of it depends on how effective a clinical trial was. If things came back positive, but not as positive as perhaps the company at home, The stock will sell off if the FDA makes an approval of a drug or a technology, but the market size perhaps isn't what people thought it would be based on what the approval looks like. There's a million reasons that people would take money off the table in biotech.

But often you will see a buy on the rumor sell on the news type of effect. But then it doesn't happen because you get a blockbuster FDA approval or a blockbuster third clinical trial and the stock will skyrocket. So, biotech is tough. Well, biotech is tough and broadening it to all industries. We've talked before about headline risk and how that can affect certain companies. And as we saw recently, Jason, how it didn't affect Chipotle. Yeah.

Yeah. I mean, I think we throw that bromide around that the market in the short term is a voting machine and in the long term, a weighing machine. And we see that dynamic play out all of the time on these quarterly releases. Obviously, we take the long reviews, so we're looking to have very heavy companies. We're focused more on the weighing machine part of things. But that voting machine nature is something, I'm afraid, is always going to be there. For the record, I would never throw bromide.

And I agree. To Jason's point, we talked about the Chinese companies earlier. Look at the market is voting against those companies right now, even though, in my mind, based on the results, they're getting heavier. Let's get to the stocks on our radar. Our man, Steve Reuio, is on vacation this week, as is producer Matt Greer. So if the show isn't any good, that's why. But fortunately, behind the glass, market foolery producer, Dan Boyd is going to hit you with a question. Ron Gross, you're up first. What are you looking at this week? Dan, I hope you're hungry. I got Texas Roadhouse TXRH. Full-service casual dining restaurant chain with 565 locations, solidly profitable. I think plenty of room for growth. 33, considerably. consecutive quarters of same-store sales growth. Their new concept, Bubba's, is doing well and has room for growth. They have raised their dividend since their 2011 inception of that dividend at an annual pace of 17.6% per year. Dan, question about Texas Roadhouse?

So, Ron, that's all very impressive, but would you rather eat at Texas Roadhouse or watch the Patrick Swayze masterpiece Roadhouse? Wow. That's a good move. It really is. I'm going with the movie. All right. Jason Moser, what are you looking at this week? Yeah, taking a look at Chipotle ticker as CMG.

I'm a little bit befuddled here. I mean, I can't help but wonder, is the headline risk really actually over? I mean, is this something that the company has finally gotten past? Because we know it wasn't very long ago. A lot of folks in Ohio got sick from some store-related issues. Look at some of these numbers here. National Avocado today drove digital sales up 60 percent, giving the company its best summer day ever. The recent back-to-school Bogo offer resulted in 1.9 million entrees sold on Saturday,

giving Chipotle its best weekend ever for the company. I feel like maybe the market's going to give Brian Nichols some slack here to try to work his magic, and that's what the stock is actually up on that Ohio news. It's just, it's confounding. Dan, question about Chipotle? So, Texas Roadhouse concept is doing well, Jason. But what about all those concepts we were hearing about from Chipotle? Well, I think they found very quickly that working this type of restaurant and fast casual with those types of ingredients is a lot easier. It's a lot easier said than done. So I would erase all of those other concepts from your mind and just get used to these guys focusing on Mexican and Mexican only.

Matt Argusinger, what do you got? Camping World, ticker CWH, a stock I brought up a little while ago. I'm just not sure why the stock is trading at an all-time low. Speaking of investor expectations, I mean, I thought second quarter results were solid. Sales of RVs were up 8% to a record. Same store sales were positive. and Camping World's inventory, which has been growing faster than revenue in recent quarters, took a big dip, fell 6% actually, and that's despite opening more stores in the quarter.

It's very impressive. Dan? So RV sales are up, but who's buying RVs? And you'd be surprised, Dan. I mean, I think you probably fall in the millennial category, but Generation X, which I fall into, apparently are big RV buyers. Dan, three stocks. You got one you want to add to your watch list?

Yeah, I actually like Texas Roadhouse at all those. I love that guy. All right, Ryan Gross, Jason Moser, Matt Argusanger, guys, thanks for being here. Thanks, Chris. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Dan Boyd. I'm Chris Hill. Thanks for listening.

We'll see you next week.