Motley Fool Money - The Economic Mood Brightens

Episode Date: May 30, 2025

Americans are feeling better about the economy. What’s that mean for stock investors? (00:21) David Meier and Asit Sharma discuss: - Why Americans are feeling better about the economy. - The headwinds facing Okta, and fundamentals for long-term investors to watch. - A retail round-up including Abercrombie & Fitch and Pinduoduo. (19:11) Former CEO of Siemens and Alcoa, Klaus Kleinfeld, discusses his book, “Leading to Thrive: Mastering Strategies for Sustainable Success in Business and Life” and finding companies with sustainable competitive advantages. (32:03) David and Asit discuss Southwest implementing baggage fees and two radar stocks: SentinelOne and SoundHound AI. Companies discussed: CRM, INFA, OKTA, ANF, PDD, TJX, BBY, OTC: SIEGY, AA, LUV, SOUN, S Host: Ricky Mulvey Guests: David Meier, Asit Sharma, Klaus Kleinfeld Engineer: Dan Boyd Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, "TMF") do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's tough to be a retail. Taylor, this week's Motley Full Money radio show starts now. That's why they call it money. The Blue Global Headquarters, this is Motley Fool Money. It's The Motley Full Money Radio show. I'm Ricky Malby. Joining me on the internet today, it's Motley Fool senior analysts, Asit Sharma, and David Meyer. Fools, great to have you both here. Hey, Ricky.

It's great to be here. Thank you. We've got a retail rundown, a slowdown for a leader in cybersecurity. But let us start with the big macro. President Donald Trump has paused 50% retaliation. halitory tariffs on the European Union until July 9th, consumer sentiment has rebounded in the latest survey, the first note of optimism in five months. Asset, makes sense the tea leaves. What are you seeing in the big macro?

Well, you're right, Ricky. The conference board showed that consumer confidence via their index increased about 12 percentage points to a reading of 98.0 this month. That's pretty confident. What do I read into this? Well, you know, as you also pointed out, we've had five straight months. months of declining consumer confidence. So I think consumers are ready for a sign, any sign that they can go out and spend again. Don't ever underestimate the optimism of the U.S. consumer.

That's what I've learned in many years of doing this gig. Now, what am I looking at beyond that? Because, truth be told, maybe that confidence is a little fragile, given the fluctuating and volatile times we live in. I'm looking over at Japan. Some stirrings in the long-term bond market there may have a lesson for the rest of the world. Japan notoriously has a very high ratio of outstanding debt to its annual GDP, its gross domestic output. We do too, not quite as bad as Japan's, but they're seeing a little bit less demand for their debt, which means that the Bank of Japan is having to raise interest rates, the government is having to raise interest rates to attract borrowers. That's a situation that we could find ourselves in the not too distant future. If we don't

get our fiscal house in order here in the U.S. And I think maybe concerns over our debt are going to just grow this year as these big spending bills went their way through the Senate after the House. So this is something I'm looking for as a sort of summer conversation that we'll likely be having right here, Ricky. So consumer confidence up and keep an eye on those interest rates. David, the odds of a recession in the U.S. happening this year have fallen precipitously on prediction market, calls she from almost 70% at the start of the month to about 40% right now. 70 to 40. That's quite the drop. Do you think this optimism is warranted? Maybe in the short term. After all, there's another pause on the tariffs.

So what does that mean? It means that there's not going to be a big shock to our economic system at least for another 60 to 90 days, right? So yeah, you can be. be happy about that in the short term, but we don't know what's going to happen once these deadlines hit for all the pauses that are out there. And my guess is that there's probably a 50% chance that there will be some tariff on Chinese goods when that pause gets lifted. And we'll see what happens with European tariffs. But yeah, consumers and investors are happy to, quote unquote, kick the can down the road. Consumer confidence is up. The market continues to grind higher, but let's revisit these risks in the second quarter earnings in July.

David, if you ever need a good comeback for someone, you can be happy about that in the short term is a great one to use. Asset, before we get to the business stories, what is all this macro data that we've been talking about for the first few minutes? Does it mean anything for the type of investing we do here at the fool? Yeah, I think it means something, Ricky. Foolish investors are sort of spongy. We like to absorb information.

That doesn't mean that we're going to act. and as a sponge myself, I'm not looking for someone to come ring all this information out of me, but you have to keep apprised of the data. Doesn't change your focus on businesses, staying invested for the long term, finding great companies, trying to hold those companies over a long time. But you have to be aware. Sometimes the big picture does change enough that you have to start making changes around the edges. So just ingest it.

Don't necessarily have to act on it. Completely agree. You need to be aware. Let's stick with our sponge, Asit Sharma. Asset, Salesforce, agreeing to buy. buy Informatica for about $8 billion earlier this week. This is a deal that Salesforce has wanted to do for some time now. Informatica is a data management company. So one example is if you're a large company with customer data across a bunch of systems, Informatica will help you consolidate it and

give you one view of that. So that's what Informatica does. Why does Salesforce want this business for $8 billion? Riki, I like the way you describe that. That's an app description of what this company brings to the table. It is very much into looking at where data originates. sort of tracing it, making these maps of where the data is. It's also good at something called metadata cataloging. So in other words, its systems can understand after a while if you, Ricky, are a customer in a process flow and maybe I'm on the other end of the transaction, it can keep up with lots of tags about different data that flows through an enterprise. Now, why is this important? Why would Salesforce care about this? Well, we all have heard how much Salesforce is into the AI

agents game. It wants to put AI agents at your fingertips, you enterprise workers, knowledge workers who are out there listening today. How can they do this better? Is if they swallow up a smaller company like Informatica, which helps those agents act with better transparency, get to the data they need, show that that's traceable, and in general, be more confident with the information they're passing back to you, information worker. So this is sort of a crucial step to undergird what Salesforce is already sort of good at with its AI agents. And I think there's something here for the investing community to give us a decent grade. It's a strategic acquisition, that's for sure. I think one thing this does is it actually integrates well with some of the other data-centric

companies that it's bought, Data Cloud, Mulsoft, Tablo. Asset's spot on. This is all about making its agents as productive as it can for its customers. And I think this is a good I think this is a good acquisition for them. David likes it, and I spoke with our colleague, Tim Byers, about this acquisition earlier this week. And he was bullish. He liked that this acquisition is all cash. And the valuation is a little bit less than when Salesforce first pursued it. Asset, how do you think Salesforce shareholders should feel about this one?

I think they should feel pretty good, Ricky, because as Dave mentioned, it fits well with other pieces. And you can criticize Salesforce for having so much of acquisitions. is undertaken just to grow. I mean, it's got $51 billion of goodwill on its books versus total assets of about $103 billion. So that's a lot of intellectual property they've paid or overpaid for over the years. But I think this one should make you feel like they can remain competitive in this AI space where it'll become increasingly difficult to be differentiated from your competitors. So what gives you that differentiation in today's world is having access to data or being able to do great things with that data that competitors can't. So this makes a lot

of sense if you're a Salesforce shareholder. But again, proof is in the pudding. You need to have this help you grow revenues and that all important operating margin that Salesforce has been improving over the last three years. Let's move to earnings. Shareholders were displeased with Octa, David, the identity management company that likes to make me do two-factor authentication at inconvenient times. That's what they do for money. This is a company that beat estimates and maintain guidance, a little bit of tariff pullback, but what are investors so fussy about here? I think investors are fussing over three things. Near-term growth, near-term growth, and near-term growth. In all seriousness, it was a strong start to the year, but analysts questioned why the

full-year revenue growth guidance and why its current remaining performance obligation growth weren't higher. I mean, if you started off the year strong, why pull that down a little bit? Or maybe why not make it as high as investors might want to see? It's a valid question because the guidance actually implies that growth is going to slow in the second half of the year after such a good start. But management stuck to their story. They're saying, hey, there's just too much uncertainty for us to make a stronger forecast right now. So this is a company, I think, with some strong fundamentals. When you look at that gap gross margin, the gross margin that accountants like, it's 77%. Net revenue retention rate, while that's slowing, is 106%.

That means that existing customers are doing more business with ACTA, but yes, that rate of growth is decreasing a little bit. When you were looking at the results, are there things in here that the long-term foolish investors should be concerned about or maybe more green shoots to focus on? So, I think we need, the first thing we need to do is understand that Octa is actually the leader in identity management. And that market continues to be a critical part of cybersecurity, and it's growing. Its new products are gaining traction as we're starting to see. The company is starting to scale. Margins are expanding.

Cash flow generation is solid. And frankly, at six times forward sales, this is a very reasonable multiple for a stock, which is still near its 52-week highs even after the pullback. I see this as an opportunity. After the break, we're looking at retail stocks and seeing if there's any deals on the rack. Stay right here. This is 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.

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I'm Ricky Mulvey, here with Asset Sharma. is David Meyer. Right now, we're going to focus on retail stocks, starting with Abercrombie and Fitch. Abercrombie posted Wednesday morning, and the results were not as bad as investors feared. Yes, David, there was a slight decrease in operating margin outlook. Shout out to the tariffs and oh no, but ANF in total is still posting comparable sales outlook. David, what did you see in the results here? I see a company that is performing better than the market was anticipating, hence the the nice jump today. Look, sales and earnings came in stronger than expected for the quarter, and management actually raised their guidance for the full year slightly, which was not

anticipated by analysts and clearly not by the market. So, as we've said before, there's a lot of macro uncertainty out there, and lots of companies are calling it out. So in today's environment, that's about as good as a company can do. So I worked out a thesis for Abercrombie and Fitch about a month and a half ago with Jim Gillies, and yes, I did it here on Motley Full Money. And one thing I mentioned was the buybacks. You like to see management buying back stock when multiples are down. And Abercrombie took out about 5% worth of their stock in this quarter. And yes, they had the cash to do it. They didn't take out debt. When you look at that, is that a smart allocation move? Can I take a victory lap here on the show? Dude, you should be running around that track with a big old

flag saying victory, yes, that was well done. Cudos to management for being very opportunistic with their repurchases, because that's not something that every company does well. The stock was significantly lower in the first quarter, and they took advantage of it. And the other thing it does, it's another valuable lesson about having a strong balance sheet. It gives companies optionality. I had to do some AI work with Abercrombie and Fitch, especially looking at their supply chain. They got factories all over the world. 5% of their workers are in China, which is really the center of the trade war. They've got more factories over in Southeast Asia.

And that's something I liked was seeing that distributed supply chain. For investors looking at retailers, how should they be thinking about supply chains right now? So I think you're spot on. You need to find out where they are because that information is available. And then the other thing I think we need to do is to pay attention to any company that gives an estimate for what they think tariffs are going to cost. We recently saw that from Decker's Outdoor, the maker of Ugs and Hoka Shoes, and now we see Abercrombie saying, hey, we think it's going to be about 50 million for their business. Any piece of information like this helps analysts model the future.

And again, with uncertainty, all that information helps. Let's move to Pinduodoo. Asit, I'm giving you a stock that investors were a little more sour on than Abercrombie and Fitch here. This is the parent company. of Timu, where our engineer and colleague Dan Boyd loves to shop, shop, boy, oh boy, does he like to buy little shiny things at very cheap prices? And then who knows what he's going to do with him? But man, Dan loves Timu. Sales still growing for this company, but net profit falling 47%. Yikes. That's the trade war in action, Osset. What did you see in the results? Yes, it is, Ricky. So, you know, the results show me a few things. One is that the, I don't

again, off again, trade war, is really starting to hurt confidence in management. Management here has a few headwinds that it's trying to work through. One is that competitors like JD.com and Alibaba are fighting back after just a really good run by TAMU, for example, is a great part of Pinduoduo. And then what we have is the de minimis exemption, which went away. So in the first part of this trade war, the Trump administration sort of took away the ability of companies like Pinduodu to send goods of small value into the U.S. without the imposition of tariffs. Now, after repealing that, they imposed a tariff, which was pretty high.

And then, again, long story with anything you talk about in tariffs, those are now down to a not-so-blistering 54%, which simply means that it's going to be really hard for Pinduodu to sell these cheap goods into the U.S. through TEMU. Now, on the other hand, you've got some subsidization, subsidization going on from the Chinese government to spur consumer spending. And that benefits more its rivals than it does Pinduoduo, which operates something of a third-party platform in China, so it can't directly participate in those subsidies. And it's having to keep its merchants happy,

who have always felt that they're sort of squeezed by Pinduoduo. So it's having to invest in those merchants. You add all this up together and you have this drastic decrease in net income. So I'm not surprised on what level. But I think that going forward, it's probably going to even out among all the Chinese retailers as the consumer in China begins to adjust. I think they'll spend a little bit more next year. So not out of the woods, but not terminal either. Awesome. Have you ever bought anything on Teamu? No, I'm no Dan Boyd. I have many times thought that I should. I'm a thrifty guy by nature. I buy books and pencils and most of the times I get those locally. for investors who want to dip into a category like this, because a Chinese retailer that is at the

heart of a lot of this tariff war trade negotiations, this is a hated category. The PE ratio has been depressed quite a bit. So some investors may look at that and see a company that's still growing sales, taking a hit on the margin, and think, you know, maybe I want to take a dip into this hated category right now. Be a contrarian. What say you to them? Yeah, I wouldn't discourage that. I would almost say look more towards Alibaba. So the Chinese big conglomerates are really good at doing tech as well as retail. Alibaba has its hands in so many tech investments. Tencent is sort of similar, although it's not really as much of a retailer. So if you're looking for something that is getting beaten down on the retail side, why not stick with an Alibaba? You have more chances to win in the

long term. And then while retail indexes have recovered since a rough start to the year, not all of the valuations have recovered. Maybe there's some deals still out there. We'll start with David. Are there any retail stocks in the bargain bin that you think are worth investors' attention? Or maybe even a full price company, something like an on holdings where you're not getting any discount on the shares, but still a strong company to hold for the long term. One company that I'm looking at is going to be Best Buy, which actually will report earnings on Thursday, May the 29th. And the reason is, is because, I want to actually get more info about the environment. And if there was ever a company that was going

to give me more information about the impact of tariffs, it's going to be Best Buy. So I'm looking there first for information, and then I'll start looking to see if there's any others in the retail bargain bin. Asset, how about you? Ricky, I think investors can still get the max for the minimum at TJ Max or its parent company, rather, TJX companies. This is a business that has a lot of discipline in its global buying teams. They're great at buying through all kinds of environments. So surprisingly, the tariff environment isn't affecting them as much as you might think. Solidly run company, great balance sheet, great brands under its umbrella. So I might look there symbol TJX.

Fellas, we're going to see you a little bit later in the show. But up next, we've got Klaus Klinefeld. he's the former CEO of Siemens talking about what investors should look for in turnaround stories. The old adage goes, it isn't what you say, it's how you say it, because to truly make an impact, you need to set an example and take the lead. You have to adapt to whatever comes your way. When you're that driven, you drive an equally determined vehicle, the Range Rover Sport. The Range Rover Sport blends power, poise, and performance. Its design is distinctly British and free from unnecessary details, allowing its raw agility to shine. through. It combines a dynamic sporting personality with elegance to deliver a truly

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Klaus Kleinfeld is the former CEO of Siemens and Alcoa. And when you're the leader of a multinational company, you've got to learn how to manage your energy. Kleinfeld is also the author of Leading to Thrive, Mastering Strategies for Sustainable Success in Business and Life. We talk about his book and how to look for companies with sustainable competitive advantages. Much of your book is focused around this idea of energy management, and many people think about just time management. We've talked about energy management a bit on the show in previous conversations, but when you were leading multinational companies, is there anything you wish you knew at that time about energy management that you know now? Well, fortunately, I learned

early enough, but still late in my career about energy management, so I could apply that in a good part of my business life, at least in the last 10, 15 years. But I was an addict of efficient time management before as somebody who was born and raised in Germany, you know, used to discipline use of time. So, yeah, I think energy management is a very important concept, you know, which was one of the reason why I wrote the book, because the question is, how does that work with energy? And you wake up in the morning and hopefully you have a lot of energy, you know, but it burns through during the course of the day, you know.

And every time you have to use willpower, you actually use some of the energy resources. And so that's one thing that I think most people don't fully understand. You have to recharge it, you know, and then comes the question, how do I get energy? What is energy? And it goes back to the simple things like body, mind and soul, you know, and I distinguish on the mind between the emotion and the mental side of things, you know. And the body part, the physical energy part, is relatively well understood. But there are concepts like breathing, sleep, you know, that are not so well understood, you know. But on the emotional side, many people think, you know, the emotions are brought on to you by somebody else,

but not realizing that you yourself allow an emotion to be created in you. And you can learn a lot of tricks, you know, also from the high performance world, you know, how you can control it. Same thing on the mental side. Mental is all about focus. and how many times have we seen that great leaders see an opportunity, one other see a challenge, you know, and there's tons of, tons of those stories. And then comes this thing that we almost never talk about in the business world.

You know, it's the spiritual side, you know. And I know whether you have in your friendship group, I do, people who actually have realized at some point in time that they feel very empty and they are lost in a certain way, you know. And I was most surprised that in the business world, people burn out much earlier, whereas in the sports world, you see people basically being at the very top for much, much longer.

You know, I personally left tennis, you know, and if you look at tennis, I mean, how this has changed over the last 20 years, the top players are way, way older than they ever were, you know. But when you look at the 10-year-old CEOs, it's kind of way down. Something surprising in your book as well is that as a leader, you were actually looking for people who are quietly cynical in meetings, making a cynical remark and making other people laugh. And, you know, there's a read on that, which is that leaders want cheerily. leaders and people who are positive about the mission going on. And I'm sure there's a story there as well. If you're in a meeting with people, why are you looking for someone who's quietly making cynical remarks?

It's not that I'm directly looking for those, but I have had the pleasure to have heavily involved in many, many turnarounds, you know. And so you get injected in this. It's usually combined with a ton of changes that are there to happen. You are the new kid in town, you know, and you go into a meeting. you describe what you think needs to happen, you know, and you suddenly realize that you hear some kind of giggling in the background, you know, and that's usually a, and you realize that there's one person

who probably had said something that made everybody else giggle, you know. So why am I looking at typically what I, what I have learned is I then go seek this person out and say, hey, look, I want to introduce myself, you know, blah, blah, blah. Just want to hear what were your thoughts. on what I was talking about because what I had realized and people who are cynical, these are very often people who are very knowledgeable in the organization, you know, because to be intelligently cynical, you need intelligence to make other people laugh, you know. So usually the dumb jokes don't don't have that much of an impact on people and people say,

are just an idiot, you know. But somebody who can make a cynical good, cynical comment typically understands the industry often, understands the business, and you can learn from it. So I try to involve the person in a conversation and just learn. And what happens is that very often I do learn from the person. For instance, that things like that have been tried out before, failed, and then I can get into a conversation, why did they fail? What can we do different to have it not fail?

Are there other approaches? Number one, I learn something. Number two also is if you then can involve the person and say, here are the reasons why I think we should do it, and this is how I would do it, which avoids the issues that you are implying, you know, you can win the person over. The moment you win the person over, this person has a followership and as known as somebody as who's synchate. If this person changes in a change environment, the followership, you know, that that person brings

you is enormous because people around there know this is not somebody who would kiss the new boss's ass, You know, this is somebody who usually stands up against the person quietly, though, you know. So the impact of winning a larger crowd over to basically be behind this, also with their, not just with their head and with it, but also with their heart. That's a look sort of behind the scenes at turnarounds. We were talking from the investing side about how difficult it is for investors to get into turnarounds, often because in the fact, financial media, people get excited about them. As soon as you hear about a CEO change. So Starbucks is a recent example of that. We were also talking about Nike and the troubles going on at Nike, where they have to win back their distribution partners after sort of shutting them off to pursue

their own strategy. And one of the themes of it, as I was talking to my colleague Jim Gillies about this, is it takes much longer than many investors want to believe that a turnaround story is going to take. Having been in the middle of it, is there any, you know, is there anything you think investors should know, especially on the retail side? We're talking to people who are investing a few hundred bucks a month in the stock market, that they should know if they're looking at a turnaround story in the market. You know, what do you need for a good turnaround? And I mean, yes, if you, you can say, I have a short-term turnaround. You know, I need a big gun and I tell them, hey, you know what? You follow my orders.

or else, you know, and so, but if you want a sustainable turnaround, that's usually not how it works. You know, you pretty much have to start from what value do I create for the customers, you know, and the value for customers is relatively simple. You have two dimensions. You either, you know, do something for them that increases their revenues or decreases their costs, because in the end, they all want a higher profitability, you know. So you really have to understand as well as possible, you know, what is it, what is the offering? How can the offering be improved?

You know, that's one thing. The second thing is, you know, you also need to understand, you know, what is the motivation of the team? How good is the team, you know, the quality of the team and how do they work together? Because in the end, I mean, I have seen again and again, again, the only sustainable competitive advantage you have in a, business is the talent and the way they work together. Both of these things, this is the magic. And the third thing is you just have to take a look at the cash flow. Don't trust any EBITDA numbers.

In the end, it's cash, you know? And I think with those three-dimensional customer people and cash, I would always, always look at that as my first true north to understand, does that work or does it not work? And I would not fall, by the way, one other thing that I've seen again and again that investors fall for the great storytellers. And I've seen many, many times a great visionary, so to say, that a great vision is only as good as the implementation, you know, and a great vision, if it's not translating into success for the customer,

basically burns the people out and people will not follow anymore. You know, they follow for a first moment, but then they lose interest because they see we're not winning. The moment people see we are winning, they will follow. You mentioned people as a sustainable competitive advantage. For our audience, that's pretty tough to identify. You can look at Glassdoor reviews. Sometimes those can be gamed a little bit, let's say.

It's incredibly difficult for us investors to know what's going on inside of a company, especially. We don't have research teams. We're kind of in it on our own. And it's still important to find sustainable competitive advantages. How do you think about those? What are some ways that our listeners can find companies with sustainable competitive advantages? Well, I started with customer advantage.

That's pretty easy for investors also to figure out. Number one, many of the investors have knowledge about the industry and understand what does the industry need, you know, and how do the offerings today and in the future fit this, you know? So it starts with that. I can highly advise the better you become, with evaluating that and checking the box on that, you know, the better off you are, you know. And then you can, I mean, I would always talk to some customers and also some competitors.

They also have good information about that, you know. So that's one thing. The other thing is on the people's side, I mean, most companies these days have investor days or invite investors. And typically it's not just a CEO, you know, but definitely also the CFO and CTO and some of the top leaders. I think I would not be shy. First of all, attend those meetings, you know,

and secondly, I would not be shy as an investor to say, I would encourage the leadership in the next investor meeting, you know, to bring on your first line management, you know. And before that, I'd like to have probably a better CV. And I've seen many people do that, you know, but if you feel that they don't do it, then you can ask for it. The third thing is, which I personally, as a CEO, have always done, is factory visits, facility visits, factory, and just walkthroughs.

And it's very interesting, you know. I think it's hard to fake a good walkthrough, you know, because you can see how people look from the shop floor, look at the leaders. Do they look away? Do they wave at them? Do they, does the leader know anything about them? How does the leader deal with the others? So I think if there's an offer to visit some facilities, I would always hop on it and potentially even ask for it and say,

hey, you know what, is there a chance to visit some of your facilities? You've been talking about these great things, you know, can we see those? Can we, you know, and just invite a few folks, 10, 20 folks. I'll pay for my flight myself, you know, I'll come. You know, so I think most companies actually would enjoy investors doing that because it also makes the conversation. between investors and the company much better. As always, people on the program may have interests in the stocks they talk about

and the Motley Fool may have formal recommendations for or against. Don't buy ourselves stocks based solely on what you hear. Personal finance content follows Motley Full editorial standards and are not approved by advertisers. Advertisements are sponsored content provided for informational purposes only. See our full advertising disclosure. Please check out our show notes in our podcast description. All right. Up next, we've got Radar Stocks.

You're listening to Motley Full Money. I'm Ricky Mulvey, joined again by Asset Sharma. David Meyer. Fools, the momentous thing happened this week. And that is that Southwest has officially ended its two bags fly-free policy. Unless you've got the right status or the right credit card, it's now $35 for your first bag and $45 for your second bag. I know how I feel about this as a consumer, but we'll keep it on the investing angle since this is an investing show. Asset, good idea, bad idea for Southwest long term? Bad idea. So, Ricky, I discussed this at length with Dylan a few months ago, and we talked about unit costs and all kinds of metrics in this industry, and maybe Southwest had to do this. But the more that I've sat on it, the more I've thought, look, guys, cut your costs somewhere else. Do you have something that's inextricably tied to your brand? That's why people fly Southwest. What are you doing to this brand? So I've actually landed on the other side from it's ambiguous to know this, this wasn't a great idea.

You've made me a brand promise and now you're breaking it. David, do you feel the same way? Or are you looking at those baggage fees and thinking, man, they need to get that cheddar for the shareholders? No. So I frequently fly Southwest and they can put whatever baggage fee they want inside the price of their ticket. That's what they already do. It makes me feel good as a traveler to know that my big old snowboard on the way to Denver doesn't cost me anything, even if it does cost me something already. So this is, I do not think this is good for their brand. I think this is just a money grab. And frankly, I don't, why would you want somebody to now try to be a price shopper when you usually have very good prices to begin with? I don't understand this. And then quickly, before we get to radar stocks, because rehearsals and airplanes are hot in the streets right now, Osset, open seating, that's going to be gone from Southwest in a little bit. But quickly, in the meantime, while Southwest does have, open seating. How are you going to keep someone from sitting next to you on your next Southwest flight? Yeah, so it's real simple, Ricky. Just look six seats ahead of me when I'm seated.

So everyone who's coming towards me, smile on, really big from six seats away. They look away, they look back at you. The sky's still smiling at me. What is going on here? I usually can just curl up on the next two seats when I do that. All right, let's get to stocks on our radar, our man behind the glass. Mr. Dan Boyd is going to hit you with a question. Asset, we'll keep it on you. You're up first. What are you looking at this week? So, Ricky, I am putting a tiny company called Soundhound AI, symbol S-O-U-N, on my radar screen. This is an AI stock that briefly had sort of meme status. What it does is it provides voice technology. And I think what's so interesting to me about Soundhound is that they've got their own foundational model for AI. So in-house, they've built this

great model, which can articulate human speech. It can really analyze voice patterns. The technology is so good that they're using it now in drive-thrus, so some major quick service restaurant chains are using it. They're selling this to original equipment manufacturers in the auto industry. So companies that could work with these great big tech companies are choosing to work with Soundhound because their technology is so good. You can also use it on your phone as an app to identify sounds and music in particular. I find that a lot of fun to hear a song and try to figure out where it's from just by opening this app, sort of Shazam-like in that sense. This is a company that's, again, very tiny. Revenue was only 29 million this past quarter, but that was up

151%. This company is going to have losses for a while for at least the next three to four years, but it is one of the companies that I've seen that seems to have its own unique value proposition out in AI land, so it's worth following. Dan, I think I heard AI there four or five times. That better get your attention. Maybe a question about Soundhound. Yeah, losses for the next three to four years sure does sound good, Ricky. You'll love to hear that. Can't wait for yet another product out in the market that can't understand me when I shout into my phone, agent. Asset, a response to Dan's insult, not really a question about Soundhound. Valid. I mean, I have this experience myself with so much of the tech I use. So I'm not going to be

disingenuous here and try to get all used cars salesmen on Dan. Time will tell. David, what you got this week? So the stock on my radar is Sentinel 1. The ticker symbol is S. This is an almost $7 billion company that continues to gain traction in the cybersecurity market. Its specialty is endpoint security, which is the protection of individual devices that connect to networks. The thing about, one of the interesting things about this company is it's been marketing its AI capabilities since before its IPO in June 2021. Before AI was seriously hot, the stock has pulled back since its high-flying IPO. The company still expects to generate

about 20% annual sales growth and recently turned cash flow positive in fiscal year 2025. So it also reports earnings on May the 28th. And I want to revisit the company to hear what management has to say in terms of its vision for the future. And that's because it trades at a much more reasonable valuation at just under six times forward sales, which is close to its 52-week low. Dan, a question, comment, or even a backhanded compliment about Sentinel 1. I mean, it's a cybersecurity firm. Like, there's not exactly, I don't know, a whole lot of shine on that Apple. It's just nuts and bolts to me personally. But, hey, they're located in Mountain View, California, which is a nice part of the United States. So I can't hate that.

David, not enough shine on the Apple for you. You're exactly right that cybersecurity is a very competitive market. But the interesting thing is, that means there's room for all sorts of competitors. And with Sentinel One, focusing on the endpoint, they have carved themselves out a nice little niche. And as they continue to gather more data from the customers that it has, as well as data from the new customers, its AI capabilities only get stronger. Dan Boyd, not a lot of room on your watch list. What's going on the watch list this week? Let's go send to one, Ricky. That's going to do it for this week's radio show. I'm Ricky Mulvey. This show is mixed by Dan Boyd. Thanks for listening.