Motley Fool Money - Three Non-AI Stocks to Buy: MRK, UPS, CVX

Episode Date: November 17, 2025

There are plenty of potential winners outside the world of AI. Anthony Schiavone and Karl Thiel join Tim Beyers in discussing three big names that may be worth betting on. Anthony Schiavone, Karl Thiel, and Tim Beyers: - Cover MRK’s $9.2 billion acquisition of CDTX. - Cover the earnings news from UPS and CVX. - Make a buy, sell, or hold call on each stock. - Play a game of Back It or Bin It featuring three dividend-payers. Don’t wait! Be sure to get to your local bookstore and pick up a copy of David’s Gardner’s new book — Rule Breaker Investing: How to Pick the Best Stocks of the Future and Build Lasting Wealth. It’s on shelves now; get it before it’s gone! Companies discussed: MRK, CDTX, UPS, CVX, WAB, HAS, CF Host: Tim Beyers Guests: Anthony Schiavone, Karl Thiel Producer: Anand Chokkavelu Engineer: Dan Boyd Disclosure: 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. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Where are the opportunities outside the world of AI? You're listening to Motley Fool Money. Welcome, fools. I'm your host, Tim Byers, and with me, our longtime Fool's Carl Teal and first time Monday podcast, Anthony Chavone. Ant, how you feeling? Fells, we're doing well, fully caffeinated, I hope? Fully caffeinated, Tim. Feeling good. Excellent. Excellent. This is good. All right, today we're talking about non-AI stocks. Seriously, we are being serious about this. Non-A-I stocks. Did you even know that there was such a thing as non-A-I stocks? We'll be digging into reports from four stocks, really three stocks that we don't often talk about

and give a buy, seller hold rating on each as we do. Let's get into it, starting with Carl, this close to $10 billion deal. I'm rounding up, but it's not quite $10 billion, but a $10 billion deal between Siddara. That is ticker CDTX, and Merck, the pharmaceutical giant, MRK. What's going on here? This is a strategic purchase, I assume, here. It's a lot of money. So what are we getting here?

This is a good old-fashioned product-slash-platform deal in the sector. And what SADARA does is they're making most directly what Merck is buying right now is a influenza a drug that is not really, it shouldn't be subject to year-to-year variation. So it's a different way of going after influenza. And you can see why that would be a relatively big deal. There's a lot of flu shots given out every year. Seems timely, yeah. Yeah, yeah.

So, you know, I think it's interesting on a number of levels. I mean, one is just that, you know, usually M&A in the pharma sector is just dominated by, oncology. And it still is, but, you know, we've seen a lot more start going to these broader health issues around obesity and around, in this case, infectious disease. So influenza. The other reason I think it's super interesting is just that, you know, it came at a huge premium. So I'll say, yeah, $9.2 billion all-cash deal, 109% premium to where SADAR was trading before that. And I just think that that gets at the sort of, you know, continuing, I think, some mispricing in the sector. I mean, you expect an M&A deal to come at some premium, but that's a pretty big one. One of the things I

saw here, Carl, so again, the $221.50 in cash that is more than double the prior closing price, huge premium here. I want to ask whether or not that is a premium that Merck feels it. must pay in order to get an active drug that fills a pipeline. Because one of the things I saw in the notes, I bear in mind, I rely on you for 100% of my insights as it relates to pharmaceuticals and biotech. But there is apparently a patent cliff upcoming for Merck in the form of a blockbuster cancer drug called Ketruda. Does this help fill the gap?

And is that the reason the premium is so big? Yes, it helps fill the gap. I mean, the key true to Pat and Cliff is a major, major deal for Merck, and it's no mystery to anybody who invests in the stock. Is it the reason the premium is so big? Not necessarily. I actually don't think that Merck is paying an outrageous amount for the company, given that this could be not only a broader drug than that, you know, this was initially looked at as something

that's just for very high-risk influenza patients. FDA has actually kind of come back and given them sort of the green light to make it a slightly, potentially a slightly broader drug. And then you could turn around and use this same platform and plug it into other infectious disease agents like fungal disease and things like that. So I don't think they're paying an outrageous amount, actually. It's a little different than, say, another $10 billion deal that just closed last week, which is Pfizer-Met-Sera, where I think they paid a huge.

huge premium. Okay. So then let me get your take on this then, and then we're going to keep moving. Buy, sell, or hold, Merck on the basis of this deal. Like, is this one that you expect to see compounding value at Merck or where are you at? I think I'm okay. I think I'm a buy on Merck just because I think Merck is attractively priced relative to the rest of the market. as to whether this deal comes out a winner. I mean, obviously, that depends on a lot of things. But, you know, the data has looked good for this approach. And so I'm, you know, modestly bullish on this.

It is possible that this specific deal will end up being a disappointment. But I still think it's not an unreasonable move by Merck looking to shore things up. Fair enough. All right. Let's move on, Ant. We're going to move on to some earnings, starting with UPS. apparently people want to be delivering packages again. So talk to me about what we saw from the UPS earnings report.

Yeah, Tim, I think it's fair to say that UPS is firmly in a turnaround. But this quarter, I think investors finally receive some hope that this turnaround is in the early stages of turning. So revenue declined nearly 4% year of a year. And admittedly, that does not sound great. but to put some context around that, the decline was primarily driven by the planned decrease in Amazon package volume that it delivers, as well as some business divestagers. So just looking at UPS's domestic business in the U.S., and I think this is really interesting, revenue declined nearly 3%, but volumes declined by 12%. So that that tells me that UPS is shedding lower margin Amazon e-commerce volume. and instead focusing on higher margin volumes in healthcare, business, the business, and international

markets. And the result of that is that the revenue per piece, which is a key metric that they track, grew 10%. And that's the fastest growth rate they've had in three years. And their domestic operating margin actually expanded slightly, even though the volumes fell 12%. So I think that's a really good sign that management's better, not bigger strategy is progressing. And on the expense side, with the glide down of those Amazon volumes, UPS expects to reduce expenses by $3.5 billion this year. And with that lower volume, UPS needs fewer trailers. They need fewer trucks, fewer aircrafts, doesn't need as many buildings. And unfortunately, it also means they need fewer employees, too. But all these decisions are aimed towards becoming a smaller, more efficient UPS. And I really think

this quarter was a big step in the right direction for the company. So is this, this does seem to be a real play on forget about growth, focus on profitability. And this is, so are we at the beginning of a surge in profitability for UPS? Do you think, is that too bold a statement? Or is it, are we on the beginnings at the beginnings of a real profitability improvement at this company? Yeah, well, I was hoping the beginning the profitability improvement would have occurred like two years ago because this plan has been in place for a while now. And there's been a lot of volatility around UPS's quarterly earnings with like their labor contract, tariffs and all that. So there's a lot of noise in their quarterly results. But this does seem to be that first step towards eventually improving free cash flow, improving operating margins and improving return on invested capital, which is becoming more efficient. I like all of those things. But let's move on to Chevron.

that was up slightly on earnings, so ticker CVX here. This is a very, very big company. And up about 1.5% for the week, what did the results look like here? And do we like them? Where are you at on this one? As a shareholder, I liked them. I thought it's a strong quarter for Chevron, despite lower commodity prices. Production of 4.1 million barrels of oil equivalent per day was a record quarter for the company, and 21% higher than last year. Adjusted free cash flow came in at $7 billion, and Chevron returned $6 billion to shareholders in the quarter through dividends and buybacks. And I thought this was pretty cool.

So Chevron mentioned that they have returned $78 billion through dividends and buybacks over just the last three years. That's a massive amount of capital relative to what is roughly a $300 billion company today. And I think that's really kind of the thesis for traditional energy companies. You know, whereas in the past oil and gas companies just wanted to, you know, drill and produce as much as possible, now they're much more focused on returns on capital and returns of capital through dividends and buybacks. And, you know, Chevron's really been at the forefront of the industry shift and capital allocation at that same point. I want to make sure I got this right. So $300 billion company, did you say $78 billion return over?

is that three years? Three years, yep. So over three years, so over $20 billion a year, really over $25 billion a year. So roughly 25% of its market value returned in terms of cash used for repurchases and dividends. Yeah, and I think that should continue too. They actually just held their analyst day. I think last week, and they planned to return between $10, I believe the number is between $10 and $20 billion annually through 2030. So, there's still return a lot of cash to shareholders,

even as commodity prices have come down. That's extraordinary. All right, fair enough. Well, let's get your buy, sell, and hold on each of these, Ant quickly. So on UPS, a more profitable UPS, are you buying this? I am buying it. So if you look at a dividend yield, it's about 7% today. Now, that dividend payout is not currently covered by free cash flow, but I do think it's sustainable, considering their balance sheet, the investments is making today to support that higher free cash flow in the future. So I think that's 7% dividend yield alone might be enough to beat the market over like a five to the 10 year period, considering where market valuations are today. So I think it's a buy.

All right. And how about Chevron? Same question, buy seller hold. Also going with a buy. So roughly 4.3% dividend yield today. Management expects the grow free cash flow at a 10% annual rate through 2030. So that kind of represents a double-digit expected return of the next five years. And I think that beats market.

Fair enough. All right. Well, there you go. There is your non-AI stocks overview. Up next, we're going to do a variation on our faker or breaker game. We're going to give it a little dividend twist. We're calling it back it or bin it. you're listening to Motley Full Money.

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but we wanted to try something a little bit different. We're going to go with a dividend bent here. Three companies, three companies that haven't necessarily been, let's say, very aggressive in raising their dividends over the past few years. And I want your takes. Do you back it or Binit to increase the dividend in 26. And we're going to start with WabTech, which is the former Westinghouse Airbrakes Technology Corporation. This is essentially making equipment systems, maybe some digital software for rail transportation, including freight rail, transit rail. They've been around for quite some time. They make train control systems. So, Ant, let me start with you here. I'll give you some stats. for 2025, they are forecasting 6.6% revenue growth. This is definitely a free cash, free cash flow

generator. They have been converting a huge amount of their operating cash as free cash flow. So they have a free cash flow margin of well over 12% here, but they only have a dividend payout ratio of 12%. So why is this dividend not higher? Do you expect it to go up in 2026, back it or bin it? What do you say? I'm going to back it. So you mentioned the dividend payout ratio is only about 12%. That's at the low end of management's targeted payout ratio of about 10 to 15%.

And they have a stated goal to increase dividends. And that dividend growth rate is accelerating over the last two years. So, yeah, I think a dividend increase this year or even next year is probable. All right. So ticker WAB, that is WAB, so we back it for some dividend growth here. Carl, I'm going to go to you on stock that you own. We're talking toys, Hasbro. And by the way, I had forgotten, did you know this, that Hasbro is the home of Plato?

I didn't know that. I mean, I knew they were the home of Monopoly and D&D. I didn't know they were the home of Plato. No, Plato's been a thing for a long time. All right. Well, the total, total revenue up 7% for the first nine months of 2025. They have a significant free cash flow margin. 75% of free cash flow is what they dedicate to the dividend today. So where are you at, Carl, here? 75% of free cash flow for the dividend is, that's not a small amount, do you back it or Binnett to grow that dividend for you as a shareholder?

I'm going to say Binnett for 2026. I kind of hope they don't, honestly, increase the dividend. And this company, I mean, they already pay something like a 3.6% yield. It's not a terrible yield on this stock. And they've got a number of challenges. I mean, I think if you just think of a company that's making things going into the consumer market, that a lot of them manufactured in China, you can sort of like fill in the blanks on what some of the challenges might be. And they've got a fair bit of debt. They've been focused on that. They're kind of in a multi-year turnaround plan and doing okay. I mean, I do think that they're starting to sort of come up out of it. So I think they're doing reasonably well. I don't think this is a bad time

to come to investors and say, look, you know, the capital, we don't need to increase the dividend. Right now. We've got better uses for the capital. Fair enough. All right. And let's come to you on our final one, Hasbro's ticker, HAS. This one is a pretty simple ticker. CF Industries, ticker CF. Talking about fertilizer here. This is fertilizer. Hydrogen and nitrogen. This is a big supplier to the agricultural sector, a lot of ammonia-based, ammonium nitrate fertilizer and so forth. So this is an interesting company. They generate a huge amount of free cash flow. For the trailing 12 months, free cash flow, according to Alpha Sense, was $1.7 billion. That's through September 30th. The payout ratio on the dividend is pretty low. It is averaged between 24% and 35%. And for a company that doesn't

generate a, I mean, they generate decent revenue growth. They generate a ton of cash. Do you back CF to increase the dividend to raise that payout ratio? Or has it been it? What do you say? So I think this is a company that has the ability to raise its dividend and probably will, looking over like a five-plus year time horizon, but will it increase it in 2026? I'm not so sure. You know, management seems to prefer share buybacks right now. And they did just increase the dividend considerably in 2022 and 2023. So, you know, I think looking at 2026, I think a dividend increases largely going to depend on commodity prices and trying to predict what commodity. prices is going to do in a one-year window is pretty difficult. So I think I'm going to bin it

with CF Industries. Fair enough. Benning it. All right. So there are your, there's your three stocks, dividend growth over the next year. WebTech, Ants says Backett, Hasbro, Carl says Binnett, and CF Industries, Ants has been it. So if you want dividend growth, the old Westinghouse, Airbrake Technologies Corporation. That's your one to go with. Maybe we can't give you personalized advice on this podcast. Sorry. Up next, we're going to preview tomorrow.

Looks like a Chinese stock showdown. You're listening to Motley Fool Money. What does leadership really look like? On the power of advice, a new podcast series from Capital Group, you'll hear from athletes, entrepreneurs, and executives who've led on the field, in the boardroom, and in their communities. It's not about titles. It's about impact.

Discover what drives them and the advice they carry forward. Subscribe and start listening today. Published by Capital Client Group, Inc. All right, welcome back to Motley Fool Money for Tuesday's show. Emily will have on Jason Hall and Toby Bordelon. And they're doing some role changes here. Jason's going to play host for a Chinese stock showdown between Emily and Toby. And they're going to be covering a few names.

I'm going to let them tell you what names they're going to be. looking at, but a few different Chinese stocks, four of them in particular. So look for Emily, Emily flipping, Jason Hall, and Toby Bordelon for tomorrow's Motley Fool money for a Chinese stock showdown. 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 or sell stocks based solely on what you hear. All personal finance content follows Motley Fool and Memorial standards and is not approved by advertisers, advertisements, or sponsored content provided for informational purposes only. To see our full advertising disclosure, please check out our show notes.

Thanks so much for being here for both Carl Thiel and Anthony Chibon. Our engineer is Dan Boyd and our producer, Zananakovalu. Thank you for listening to Mutt with Full Money. I am your host, Tim Byers. We'll see you again tomorrow. Fool on, everyone. Thank you.