Motley Fool Money - The New Bull Market

Episode Date: June 16, 2023

Some are saying it’s a bull market, we’re calling it a giddy one.  (00:21) Ron Gross and Matt Argersinger discuss: - The latest inflation numbers and the Fed’s plan to “skip” a rate hike. - How a small group of companies are driving market returns, and why the rest could catch up.  - Why the market was hungry for shares of restaurant brand Cava. (19:11) Polina Pompliano shares some unconventional business advice and insights from her new book Hidden Genius: The secret ways of thinking that power the world's most successful people.   (35:13) Ron and Matt break down two stocks on their radar: Chevron and Burford Capital. Stocks discussed: CAVA, NDAQ, KR, ORCL, SPOT, SHOP, CVX, BUR Host: Dylan Lewis Guests: Matt Argersinger, Ron Gross, Polina Pompliano Producer: Ricky Mulvey Engineer: Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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

What? Oh boy. Fantastic. You guys go hard. Daredevil Born Again official podcast Tuesdays and stream Season 2 of Marvel Television's Daredevil Born Again on Disney Plus. Investors are hungry for a new IPO. Motleyful Money starts now. That's why they call it money. Full Global headquarters. This is Motley Fool Money Radio show. I'm Dylan Lewis.

Joining me in studio, Motley Fool Senior Analyst, Matt Argusinger, and Ron Gross, great to have you both here. Dylan. You're doing, Dylan. We've got a splashy IPO, a look at Hidden Genius and stocks on our radar, but we are kicking off with the big macro. Ron, we got an update on inflation this week. New CPI data shows inflation up 4.4. for the year ending in May, down from April's check-in and down substantially from last year. This seems like good news, Ron? Yeah, I'll take good news where I can get it. Lowest level in about two years.

That sounds like good news to me. The smaller than expected increase reflects decreases in the cost of energy, gasoline and electricity included in there, a slowdown in food price increases, but on the other side, rent and housing does remain elevated, used cars and trucks do remain elevated. Now, this is somewhat backward looking, which is a criticism the Fed has fallen to. Those things do remain elevated, and they're important because housing makes up about one-third of the indexes waiting. So whatever happens to housing is going to have a really big impact on that consumer price index. Core inflation, if you strip out food and energy, a little bit hotter, up 5.3% from a year ago.

so important to understand that as well. But I think, as you said, at the top, we will take good news where we can get it. We got an inflation update, and we also got an update from the FOMC. You got to love it. It's almost like they know we're paying attention to both of them at the same time. This week, the Federal Open Market Committee decided to keep rates where they are in what some folks are calling a skip. Ron, we're going to skip Matt right now and stick with you here. What jumps out to you? So following the release of that CPI data, the market guess correct? that there was nearly 100% chance that the Fed would skip.

And that is exactly what happened. The vote to skip a rate increase was unanimous. But, there's always a but, right? The Fed also signaled that rate increases could come later this year. Fed officials indicate they expect to raise rates two more times this year. I don't believe that is a foregone conclusion. I believe they will look at the data and make the appropriate decisions. That's what they think currently right now.

investors basically shrug that off, although at first they didn't like hearing two more. But they shrugged it off. Things look pretty good. Inflation is moderating. Economy remains solid. Maybe the labor market remains too solid, quite frankly. The Fed probably wants to see some weakening there in order for them to feel comfortable that inflation will continue to come down.

But the markets have been strong. Inflation looks good. We're not anywhere near a recession right now. so that soft landing becomes more possible. And don't forget that Kava IPO that we'll talk about in a bit, got people just a little bit giddy on Thursday. Yeah, I think things are surprisingly excited in the markets. And we see some short-term news and some near-term positivity.

But if you take a step back, Matt, and look at where we've really been over the last 9 to 12 months, there's a lot of good results and good returns here for investors. There is. I mean, speak, I think Ron said it right when he said giddy. because guess what happened about a week ago, the S&P 500 hit 20% above its October lows, which if you're kind of a technician there that says, hey, we're in a new bull market, whether you believe that or not. I think what's fascinating about the stock market lately, and it's just been a relentless rise for the market,

is traders will often call this a lack of breadth in the market. I'm not a trader, but it is interesting to see, I think, the disparity between the market cap-weighted S&P 500, which is the traditional measure of the index. So that year to date, this is as of Thursday's market close, it's up over 16% for the year. And that's, I mean, we're not even six months through the year. That's a fantastic year, right, let alone six months return. But if you look at the equal-weighted version of the S&P 500, which you can, you know, there's the Invesco, S&P-F-F-R-SP, as a Thursday, that's up only 6%. And then if you come into my world right now of dividend stocks. If you look at the Schwab, U.S. dividend equity ETF, that's actually

down 2% year to date. So you look at that and say, well, gosh, there's a whole section of this market, this S&P 500 that's not really even participating in the bull market. And a lot of, I think, traders would say that's probably bad news. But you could look at it this way. It does tell you that most of these stocks haven't participated. And if they start catching up to the rest of the market, and that's usually what happens over time, the equal weight kind of does catch up to the market cap weighted. This bull market could be for real. I mean, if these small-cap companies, these mid-sized companies, start contributing to the returns, wow, look out ahead. We've started seeing people refer to this a little bit as the S&P 7, where there's a very small portion of

companies driving a very large percentage of the returns in the market. Ron, do you feel like the other 493 companies in the S&P, you're going to start pulling their weight at some point? You know, they're not necessarily weak. They're just weaker. You know, we have seen some strength in industrials. Retail actually showed some signs of life just recently. You saw Target and others move up. S&P as a whole, 19 times forward earnings, which people will point out and say, well, that's not so cheap. Be careful. But if you strip out the stellar performance of the invidias of the world, you'll probably see something that's a little bit more reasonable. And I think that's important to understand. Right. I think if you look at the equal weight,

again, going back to that equal weight SMP, the forward multiple is closer to 15. which is kind of around the historical average for the market. If we're looking for another encouraging sign in the market, the lonely IPO market has a new darling run. Fast casual restaurant brand Kava listed on the New York Stock Exchange this week. Shares nearly doubled in their first day of trading. It seems like people were looking forward to this one. Oh, yes. Giddy. Another word we will continue to use.

I go way back with this restaurant. I'll tell you a 10-second story. It's a local Rockville, Maryland startup, which is where I currently live. and I talked about Kava on the show pre-pandemic. I talked about them when they purchased Zoe's Kitchen in a private transaction. And I mentioned that I thought one day they would go public. The next night, I'm eating at their full-service Kava restaurant, the one that has waitresses and his full service. And I saw the owner, I called him over, told him about our radio show, and that I talked about him on the show yesterday.

And he said, oh, my gosh, I heard that show. That's you? He called his wife over. He offered to buy us drinks. He was so excited. It was so much fun. He was giddy. It's a wonderful restaurant, by the way, the full-service one, as are the other ones. So that's my little story. Fast forward four or five years, and this IPO is not just a big deal for Kava, but for the IPO market, which has had really weak, lackluster 18 months. But this one, boy, as you say, people were geared up for it. It wasn't a cheap valuation to start with, and then it doubled. It's a 263 fast casual chain.

They have a dips and spread business that they sell in stores like Whole Foods. I happen to like those as well. They did acquire Zoe's Kitchen locations. They've converted 145 of those currently into Kava's. Real success story, three, four, four high school or even elementary school friends got together to start this. They're going to use the proceeds to keep opening up new stores. The wrap on the valuation is that they're not profitable. That's because they're in growth mode.

Their store economics are pretty good with about 20% margins on a store basis. So if they stop growing right now, they probably would be quite profitable. But at double the valuation from the IPO, I would say, let's be careful here. The stock did start to sell off on Friday. We're probably seeing some people flip the stock and make a quick profit. But it's a great concept, great food. I'm a big fan. Just has to trade at the right price for me.

Matt, I think a lot of people are paying attention to this one. because we have been so desperate for new names in the market. Do you feel like this reception maybe opens the door for some of those other big-name private companies out there, the Stripes, Reddits, Instagrams, discords of the world to say, you know what, maybe we'll make an entrance in here? I think that could be right, Dylan. Not that Kava is the one that kind of breaks the floodgates, but, I mean, it has been, as Ron said, a lackluster period for IPOs.

2021, of course, was the record for IPOs on U.S. exchanges. There were 416 IPOs that year that raised almost a lot of, $160 billion. That's a huge year, but then it completely fell off the table last year. There were just 90 IPOs. Less than $10 billion was raised. It was kind of the lowest year since really coming out of the financial crisis. It's picked up a little bit this year. There are actually 33 IPOs in the first quarter. That's a high number for me. I didn't realize there are that many. And then there's been, you know, you had Kava since. You also had Kenview, the spinoff of the Johnson, Johnson Consumer Health business. And as you mentioned, there's

companies like Stripe, Reddit, even SpaceX maybe could be in the offing. I think it's all about the overall market, though. Here we are, again, we're close to all-time highs in the stock market. Credit markets are kind of not as unforgiving as they thought they might be, so it could open the door for more. And this pent-up demand is one of the reasons you saw Kava's stock jumps so much. And so the next question people are asking, is this another sweet green, which saw the same thing happened, but not so great since then. Stock has come way back down, or is this Chipotle, or perhaps something similar to Chipotle?

And right, by the way, what industry benefits usually the most? from a healthy IPO market? Well, the big investment banks, right? Another part of the market that really hasn't participated in this bull market just yet. One prediction I do feel pretty safe on. I think Ron is going to be going back to Kava this weekend, trying to get some free drinks after talking about it on the radio show today. For sure. All right, after the break, we've got a $10 billion deal that flew under the radar and a company benefiting from AI in a big way.

Stay right here. This is Motleyful Money. Welcome back to Motleyful Money. I'm Dylan Lewis here in studio with Matt Argersinger and Ron Gross. Matt, earlier in the show, we were talking about how inflation is moderating a bit, especially in food prices. Looking at results from Kroger this week, seems like we're starting to see some discount and maybe a little bit of slowing down in those price rises? I think that's right, Dylan. I mean, I think a lot of investors know about Kroger, but they might not know it's the second largest grocery in the United States behind Walmart. It has around 2,700 stores, 35 states, and it's not just Kroger. It's Ralph's

Harris-Teter, Food for Less, Smiths, even a delft. Dillins in there? Dillon. Hey. But yeah, fiscal first quarter results. Pretty good. Same store sales up 3.5%. Revenue of 45 billion was roughly in line with guidance, and earnings came in a little better.

I think, to your point, Dylan, it's companies like Kroger that sell essential items. So they're a little less susceptible to the shifts in consumer discretionary and kind of the pricing changes we've seen there. But it helps that those prices are coming down for things like food and basic healthcare items. The one thing I wonder about, though, is there is still inflation in the market. You are going to have a rollback of SNAP benefits here in the next few months. How do its lower-income consumers, which often go to Kroger? How might they be impacted by that? We've looked at Kroger a lot for our dividend investor service here at the Fool.

It's got a great track record of paying and growing its dividend. The one thing that's held us back, though, and that's kind of hanging over the company in the stock, is that they're trying to merge with Albertsons, which is the third largest grocery company in the United States. The deal was announced way back in last October, and the idea was if Kroger can acquire Albertsons, it would kind of help them keep pace with Walmart and Amazon, who's making big inroads into the grocery space, excuse me.

But the deal, as many deals right now, it's still under regulatory review, no real visibility in sight is when it actually gets approved. What's interesting, though, is if Kroger is able to combine with Albertsons, they'd have about 13% market share, still way behind Walmart with 22%. So you're trying to see why that Berger wouldn't be allowed to go through. Ron, I know you weren't watching Kroger results too closely, but over-under. AI came up five times on the company call.

Which direction. It's got to be over, right? It is. The answer's eight. Which is surprising maybe for a grocery store. But we continued to hear AI in results from Oracle this week. The company closed out its fiscal year by posting $50 billion in revenue for 2023, and the company's cloud segment was a big part of the reason why it's emerging as one of the preferred offerings for people doing generative AI, Ron.

You used to be all ball bearings. Now it's all AI for those Chevy Chase fans out there. The stock's on fire. I mean, this is not your Oracle from May 2000 when it got caught up in the telecom equipment boom and the internet boom and then kind of came back down to life. It's back. And this boom in generative AI is really boosting demand for all of their cloud services. They're focusing on expanding their cloud infrastructure business. They're going to try to compete with Amazon and Microsoft, a daunting task because they are clearly the market leaders. But it appears there's plenty of dollars to go around, at least now, as the hype and the froth really has taken hold. They're boosting their cloud offerings. They have a deal with Nvidia.

They acquired CERNOR last year. That has helped the business. And it's showing up in the numbers. Cloud sales up 54%. That's after a 45% jump in the previous period. Their cloud infrastructure business up 76%. Their application business up 45%. So, very, very strong.

Overall sales were not as strong, only up 17%, and margins were down a bit because operating expenses were up. So you boiled that all down, and you had an earnings per share up about 8%, not bad at all. In terms of guidance management, said cloud revenue should increase at least as much in the year that just ended as we just saw, and we also expect to deliver high operating margin percentages, higher operating margin percentages this year, they said, only 23 times. This is not a crazy expensive tech stock.

It's very interesting. Adobe just reported similar results. It's all cloud. It's all AI. Adobe's at 29 times. Oracle at 23 times. Salesforce at 27 times. Not too bad. Might want to take a look at Oracle. Yeah, for a business that's on fire, I want to put some quick numbers to that, Ron. Oracle, currently at all-time highs, up 80% over the past year, 140% over the past three years. Is this a name that we should start paying more attention to in the likes of big tech? Because it has sleepily become nearly a $400 billion company. I think, yes, and Larry Ellison is reaping a lot of those rewards as now one of the richest people in the world. These numbers have to continue, though. These kinds of growth numbers have to continue. Otherwise, these stocks all of a sudden become expensive.

So we need to keep an eye that growth persists. One spot to look for growth, NASDA buying ADENSA and another sign of optimism in the markets. Matt, we saw a pretty big acquisition this week. NASDAQ buying financial software company ADENSA for $10 billion. This company specializes in risk management and regulatory issues. What did you see in the release for this announcement? Right. Let's keep in mind that NASDAQ is, I'm surprised about this.

We talked about this before the show. So, NASDAQ is only about a $25 billion company. So here they are doing a $10 billion deal. That's big for them. It's definitely a needle mover. But you said it's kind of a provider of, quote, mission-critical risk management and regulatory software to the financial services industry. Let's hope they can run some of that regulatory software maybe over their own deal

to see if it actually gets the green light because they're going to have to do that. But, yeah, I mean, this is for a NASDAQ. This is kind of a high-growth, high-margin, recurring revenue type of business that they see boosting growth and margins overall. all for the company, comes with 115% net revenue retention, which means that customers are generally spending more dollars over time on the platform. Does this get approved? I think that's the big question for everyone in this market right now. I think it does, because this is, first of all, it's coming from private equity. It's not another publicly traded company.

While it's big relative to NASDAIC size, it feels more like a complementary addition to the business rather than NASDAQ going out and acquiring another exchange or another trading business. But I think the bigger point for me is that this is just another example that companies are interested in doing big deals. I think last year, dealmaking was non-existent. Here we are, 2003, especially with the market, technically a new bull market, kind of approaching a new all-time high, investors are getting, gosh, I'm going to do it again, Ron. Gitty. Gitty. Or companies are getting giddy about doing deals.

Yeah, last year, deals not great. People worried about recession. Even the first quarter of this year, not great. although they topped $1 trillion, but still, relatively not that strong. But we are starting to see a pickup. I'm seeing a lot of activity in health care as well. United Health did a deal. CVS did a deal.

Leap Therapeutics, Amgen, Johnson & Johnson, all did deals recently. And I think that will likely continue. You're also seeing retail deals. Always you see tech. So I do think we're going to start to continue to see a steady flow, which, again, we'll make those investment bankers awfully happy. I know, and I'm glad you brought up health care space because I think that's another sector that hasn't really participated in this market and the fact that there's probably some good valuations there to get deals done.

Matt, one final note on that NASDAQ deal. I was a little surprised to see the stock sold off 10% on the announcement. We have seen some of these big mergers and acquisitions go sideways recently. Do you think there's a little bit of pessimism around? I think it's a big pill for, you know, speaking of health care, it's a big pill for NASDAQ to swallow. and the fact that they're funding the deal through their own stock is probably a reason for why the sell off there. Ron Gross, Matt Argusingerfellas, we will come back to you in the show in a little bit. But first, we've got stories that show the hidden genius of Spotify's Daniel Eck and Shopify's Toby Lutkey.

Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Dylan Lewis. Whenever we can, we like to learn from the best. And so does reporter and author, Paulina Pompiliano. She spent the last few years studying some of the work, most successful people each week as part of her newsletter, The Profile. The Lessons and Framework from That Work are in her new book, Hidden Genius, The Secret Ways of Thinking that power the world's most successful people. This week, Paulina gave us a rundown on how Daniel X view on leadership led to one of Spotify's greatest innovations and why you might want to rethink any idea that can fit into an elevator pitch. Your book has no shortage of stories and you take it a step

further and you get into the concepts and frameworks that a lot of folks that you've profiled really lean on in order to be successful. You've got lessons from folks like Al Pacino. You also have lessons from professional rock climbers. Having spent so much time looking at this stuff, what have you personally picked up from studying the hidden geniuses? I'll talk about one framework that I've really applied to every area of my life, which is I heard LinkedIn founder, and he's also an investor, Reid Hoffman say this once on a podcast, but he said, consistency plus time equals trust. And if you think about that, that's something that you can implement in every single area of your life.

It could be relationships. It could be your professional life. It could be business. It could be investing. Basically, when you don't trust people who constantly say they're going to do something and then break their promises. But it's not like one time. I was like, hey, Dylan, I can't do the podcast. Let's reschedule.

It's like constantly over and over and over a long period of time. So, you know, you can apply that to your personal relationships. Like you're probably attracted to people, if you're a healthy person. You're probably attracted to people who keep their promises to you. They say like, hey, let's go out on this day and they keep it. And then over a long period of time, that's how you build the foundation for a relationships because you have to, like, trust each other. Like Charlie Munger says, like, if you're about to get married and your marriage contract is 47

pages, I suggest you not enter. Because it's like that, that's not a bedrock of trust, right? But for me, the way I implemented this is when I started the newsletter of the profile in February of 2017, I was like, okay, this could go like one of two ways. I could start this and say, I'm going to publish every week. Like, I'm going to be super consistent. but then, you know, life happens. Somebody passes away.

You have to go to a funeral. You have to travel across the world sometimes. You have a child. You get married. All these life events happen. And you know that you're probably not going to be able to be consistent. So I was like, what things can I put into place to keep that formula? Because I know that if somebody signs up on a Friday and then I have a vacation that weekend and I don't send it on Sunday,

they're not going to get it until like a whole week later. That means that they're going to be like, what the hell is this? Like I forgot, I signed up for this. So I put like things into place that would allow me to be consistent even when life happened so that if something came up, I still had like a backup. Like here's, I'm going to send you this on Sunday. It's not going to be like the complete newsletter, but it's going to be something that keeps that consistency going.

And I truly believe because I haven't missed the single Sunday since February of 2017. that allowed me after three years of doing the profile for free, earning people's trust, and then asking them, like, hey, I have a paid layer. And then they were willing to back me financially because they knew I wouldn't take their money and run off to Mexico. Yeah, Paulina, if I'm not mistaken, that concept that you're laying out there in the book, you talk about it as the compounding element of trust. And this idea that these habits accrue over time and build.

and I think a lot of our listeners as investors are very familiar with the idea of compound interest, but it's something that I think can probably be taken a step back and apply to a lot of the things that people do. And it's like basically Naval Ravikant says, like, all returns in life have come from like the compound interest of something. And it could be money, but it could also be trust. One of the people I talk about is Shopify CEO Toby Lucky. And he says that whenever he meets somebody, your trust battery is at like 50%. He calls it a trust battery. He's like every single interaction you have with this person either discharges it a little bit

or charges it a little bit. And over a long period of time, you kind of know where this person stays. Like is that a reliable person? And he's like aimed to be a person whose battery consistently stays charged at over 80%. I think that's a good metric to follow. And I think Toby Ludke is a pretty good person to follow. in general. We're big fans of him here at The Fool. We've been following Shopify for a long time. I'm curious, I know you've really talked about people from all walks of life here, but we have a focus

on the publicly traded world and companies that are publicly traded leaders of them. Are there any other names in the investing sphere that our listeners might be familiar with that you have some stories about? Okay, for example, Spotify, CEO Daniel Eck. I find him fascinating because he has kind of this really interesting concept for leadership and the way he approaches it. And he talks about how he one time heard like an airline CEO say that you should invert the leadership pyramid where the CEO is not at the top, they're at the bottom. And he was like, that would be interesting. Like how could I implement that at my company? So, you know, we've all heard of like bottoms up leadership, but what does that actually mean in practice? And he talked to

about how if you see yourself as the CEO is just an enabler of creativity and resources and giving fuel to people's ideas, that's the lifeblood of your company. You are not the lifeblood. It's all the employees and all the people that make it that. And he talks about how, as an example, he had this team of engineers working on this feature that they thought would be amazing. They thought if Spotify could have a personalized playlist for every single user based on their own interests in music and whatever, could they create a personalized playlist for them? And Daniel Eck was like, eh, that's all right. Like, it's not worth spending all this money and time on this. It's probably, you know, a very small portion of people are going to use it.

They ignored what he had to say and continued working on it despite his lack of enthusiasm. and then he found out that they shipped it, they launched it to the public, through the press, like with everybody else. So that just shows, by the way, how as a leader, because if you're terrified of your boss, you would never do this. You would never launch something without them knowing.

So they did that, and he was like, I remember reading it in the press and being like, oh, my God, this is going to be a disaster. And that turned into Discover Weekly, which is one of Spotify's most loved features now. And I think the lesson in that is a lot of times the CEOs at the top, if it's a top-down approach, they stifle creativity. But if you kind of even just have the mindset of bottoms up, it seeps through the culture and people are more bold in taking risks than they otherwise would be if you have a terrifying, terrifying CEO who's like, it's my way or the highway. And they run it more like a dictatorship than a democratic process.

As a long-time Spotify user, I'm thrilled that that was the culture and approach there at the company. I love my daily mix and I love my Discover Weekly. I liked the discussion of executives there. And for your work at the profile and for the book, you spend so much time scouring the internet looking at all of these different pieces of who these people are, these moments that kind of speak to them and help people create a composite. it, our analysts and our listeners are trying to do that all the time when they're looking at management companies or a founder. And having spent so much time doing it, I'm curious,

do you have any tips for how to do that well? Yeah, I do. So in the book, I tell the story when I was in college and I had a journalism like one-on-one class and we had to write a profile of a classmate, I ended up profiling my classmate, but I had only just done the interview. And I I wasn't happy with it because I was like, God, this person's so boring. Like, I asked them all these questions, but it wasn't a really exciting life or exciting answers that they gave me. So I went to my professor and I was like, listen, it's the early on in the process. Like, let me change my subject.

And he was like, no. Because he recognized that, like, I as an interviewer hadn't done my job. I hadn't evaluated this person properly. But also, I hadn't asked the right questions. He said, no one is inherently boring. they're only boring because you haven't asked the right questions yet. So that one thing I think about on a daily basis, I think that to evaluate somebody well,

you not only have to ask them good questions, which is key, but also you have to, Hans Zimmer calls it listening to the subtext. So you have to listen to the subtext of the conversation or the situation that you're in. What are they saying without actually saying it? what is their body language saying? Are they being defensive when asked certain questions? But also, the thing that I pay most attention to as an interviewer that I think all investors should pay attention to

is listen for the things that people emphasize and the things that they downplay. Because that tells you more about what they're trying to show and display and what they're kind of maybe trying to hide. I'm constantly listening for that. When I ask you about your life story, like, why are you telling me that part, but like, what about that other part, et cetera? Why are you emphasizing this portion of the business, but you're not really talking about that one?

Why your answers long for this question, but really short for that one. So it's like listening to the subtext and understanding the incentives of the person giving the answers. One thing I wanted to ask you as we close here is there's an idea that you bring up in the book, and it's from Ed Catmull, who's one of the co-founders of Pixar. and it's, I think, counter to almost what every business student is taught in class. And it is that good ideas do not necessarily fall into an elevator pitch type approach where they're easily explainable. Can you talk a little bit about that and also just any of the kind of counterintuitive elements that you pick up from the book?

I love that the elevator pitch, like I hope I kill the elevator pitch. No, the elevator pitch is the idea that if you're stuck in an elevator, with like your boss, you can explain your idea in 30 seconds or less. And you're taught that all through school. Like, what is your elevator pitch succinct to the point where it's easily understandable? But Ed Catmull, who's incredible and he's very, very creative, he says that, unfortunately, that's not how creativity works because if you tried to explain some of the most successful Pixar films in 30 seconds or less, it would sound insane.

He's like, imagine describing toy story. He's like, people would be like, ooh, there's going to be like overly commercial, like all these toys. People can buy, like, what the hell? Or like Ratatoui, a rat that can cook. Like, that sounds disgusting. And if not done tastefully, it can really end up being disgusting. So he's like, if you can sum up your idea in 30 seconds, that means it's probably iterative of something that's already happened or somebody has had this idea before and it's been done. It's not that original.

Basically, what I took away is that to be a truly original creator, you need three things. You need to have a really unique point of view on the world. You need to have a really ambitious idea. And also, you need to be able and ready to fail spectacularly in the pursuit of that idea. And Cat Moll talks about how at Pixar they have these like war room meetings where they really like go after and attack the idea from all sorts of angles. And he says it gets really heated, but it's never personal. It's also what Julia says, like, attack the idea, not the person.

See it as like a separate entity. Because once you are able to challenge it in that way, it gets better and better and better. And then I think he says, like, by the way, the film is never like finished or good. He's like, it's still shit, but we put it out anyway because this is the best possible version that we could get to. And I think like that's that's really counterintuitive. But the other thing I want to touch on is when you're looking at like public company CEOs or people you were evaluating to make an investment in, I always think about he's now at Bridgewater Associates, but Mark Bertolini, and I was able to interview him about this.

But he told me that he has this like whole idea of like the four levels of Taoist leadership. He came up with it, but it's based on Taoism. And he says, as a leader, first your employees hate you. The second level is they fear you. The third level is they praise you. And the fourth level is they don't need you. You're invisible because the company can like run itself. And I think most people, when they think about leaders, they don't think about like how will I, how will they become invisible?

Because that is the ultimate goal, right? Like, if the leader is successful, the organization can run itself. And I think when you're evaluating people, you should look. Like, is this person just trying to make themselves needed or useful or there? Because in the case of Bertolini, his final chapter at Etna was to shepherd the sale to CVS health. So, like, you know, he did his job to his investors, employees, whatever. And I think, like, when you're evaluating someone, you should be like, is this, the type of leader who aims to be invisible.

Alina Pompiliano's book, Hidden Genius, is available wherever you get books this June. Coming up after the break, Matt Argusinger and Ron Gross return with a couple stocks on their radar. Stay right here. You're listening to Motley Full Money. Get up, stand up. Stand up for your right. Get up, stand a right. Don't give up the fight. It's a for your right. As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks. Pay solely on what you hear.

I'm Dylan Lewis, joined again by Matt Argersinger and Ron Gross. Jens, let's get over to the stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Matt, you're up first. What are you looking at this week? Well, we've talked a lot about sectors of the S&P not participating in this bull market, and energy is the worst among them so far this year. So the contrary enemy tells me that I want to look for bargains in the energy space.

Because I'm focused on dividends and dividend growth, I really like Chevron, ticker CVX. Not only do you get a dividend yield of almost 4%, Dan, but you get a dividend that's grown at least, or about the two times the rate of inflation over the last 10 years, so pretty strong growth there. It's a fully integrated energy giant, so it makes money from upstream to downstream assets. That keeps revenue and profits steadier, even when oil prices are volatile, and they usually are. Here's why I like best, Dan. Chevron is producing a ton of cash right now, investing in the business, buying back stock, paying a dividend, and that's what oil prices is around $70. Management expects they can maintain that level of investment and shareholder yield with prices as low as $60 a barrel. So there's a margin of safety in there. Love the income, love the valuation.

And I think it's one of the safest ways to bet on the energy sector. Dan, a question about Chevron. Seems like a stock that's got it all in the bag, Maddie, except for that whole climate change thing. Right. Certainly a long-term concern. Definitely Chevron is working on that. They've got a lot of initiatives and carbon capture and other things in that space. Ron, what's on your radar this week? I've got something a little different this week, courtesy of my friends over at our Value Hunter Service. Full disclosure, I own the stock as well. It's Burford Capital, B-U-R, leading provider of capital to the legal sector. Typically, this means they will fund a plaintiff's legal cost in exchange for a portion of any financial. financial recovery from that lawsuit. They've only lost about 9% of their concluded cases. They've got a very strong track record. They've recently won a huge case in Argentina that could be worth $4 to $7 billion. The whole market cap of the company is only $2.9 billion. Now, that'll

probably be negotiated down, and they won't get the total windfall. But that's just one deal. The stock did pop significantly as a result, but my friends at value hunters think the stock is probably worth double where it is right now. And the CEO said, for those who are long-time listeners, that the company is firing on all cylinders. Huge. How could you not like that? Dan, a question about Burford. So this is a company that gives people money for lawyers to sue people? Yes. Lawsuits are very expensive. People can't often fund those out of their own pockets, so they will lend you money, and they will take a portion of the proceeds if you are successful. Wow. Sounds even more evil than oil companies. Dan, you've got law, you've got energy. What are you doing here? Which

one's going on your watch list? Wow, I hate both these stocks, Dylan. This is hard. No, I'm just kidding. These are both, look like some pretty solid companies here. I think I'm going to go with Burford because I'm really curious as to how this company works and what they can do in the future. Nice. Put it on the board. Matt Argusinger, Ron Gross. Thanks for the stocks. Thanks for being here, guys. Thanks, Dylan. That's going to do it for this week's Motleyful Money Radio Show. The show is mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see you next time.