Motley Fool Money - When is it a Trend? When is it Hype?

Episode Date: September 17, 2026

Every few years, a investing theme comes about that momentarily captures the zeitgeist, but then fades into the background just as quickly. Anyone that has invested in nuclear stocks recently is the most recent in a long line of investing trends that get caught up in frantic enthusiasm that far surpasses the industry’s progress. Jon, Matt, and Tyler share war stories of the hype cycles they got caught up in and how investors can avoid that fate. Plus, Lennar’s earnings in a rate hike cycle and the mailbag. Have a question? Email us; [e-mail] Tyler Crowe, Matt Frankel, and Jon Quast discuss: - Homebuilders in a rate hike cycle. - Are there housing stocks that aren’t playing the waiting game? - Hype cycles vs. durable trends - What part of the cycle fits you best? - Mailbag: Pullback stock ideas. Companies discussed: LEN, FIGR, UPST, INVH, AMH, OKLO, PTON, FIVE, XYZ, MELI, AXON, BN Host: Tyler Crowe Guests: Jon Quast, Matt Frankel 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

Is the investing trend your friend? Motley Fool Hidden Jems Investing starts now. Welcome to Motley Fool Hidden Jems Investing. I'm your host, Tyler Crow, and today I'm joined by longtime pool contributors, Matt Frankel and John Quest. Guys, I think it's fair. We talk about trends a lot in investing, but there is a difference between like hype cycles and durable business trends and stuff like that. We're going to dig into that a little bit.

But we're actually going to start on the opposite end of a hype cycle. and talk about an apathy cycle, and that's in housing kind of specifically. We're in the off season for earnings, but there's always those few off cycle companies worth following. Lanar, it's the largest home builder in the United States, so I think that sort of qualifies here. The market kind of shrugged at its results, but here's what stood out to me, guys, as a home builder.

It's stock right now trades for less than book value. So to use housing terms, the market's implying the company is basically, we're underwater. It's worth more liquidated than trying to operate it as a business anymore. So, Matt, you like to dig into home builder's numbers, probably more so than anyone else in the show. We could fight over it, but I'll give you the title here. Was this really that bad? I know we just had a rate hike and everyone's scared of housing, but were the numbers really that bad? Well, yes and no.

So Winar missed on both earnings and revenue and cut its guidance and the CEO gave pretty terrible comments. The stock is down like a great start. Right. The stock is down by 2%. Can you imagine what an AI infrastructure stock would be if it had that four pack of bad news? But Lenard, you know, the numbers were terrible. And it's not just that they missed expectations.

It's that they're having to incentivize buyers. This could be good news if you're in the market for a house. Incentives at Lenar's for Lenar's closed homes have been about 12% of the selling price. That means if you're buying a $400,000. thousand dollar home. Lanar is giving you $50,000 or so worth of incentives. You know, that's pretty remarkable. I mean, construction costs are down a little bit. There's some bright spots here. The company's been buying back stock, as are a lot of other home builders. But I mean, it feels like Lenar and some of these other home builders are essentially running clearance sales on their

products for the past three to four years. And now with the new Fed hike, there's really no end in sight. It's a pretty good time to have money to buy a home right now. I mean, there are some headwinds in the home space, aren't there, Matt? And interest rates are playing a big part of that. The president, of course, saying that he would love them 1% or less. The reality is that ain't happening. He has his guy in there. They were not able to bring rates down.

In fact, they were looking at the debt and saying we actually need to raise rates. I mean, I feel like Wesley in the pit of despair, in the Princess Bride. I mean, I would like rates to be lower. A lot of people would like rates lower. and for a variety of reasons. The reality is it's not happening right now, and that is the space that we find ourselves right now. Matt, we've been talking about this,

and John, we've had this conversation about housing for a while. It's lousy. We've all been kind of waiting this long time. It's like, well, when interest rate cuts, interest rate cuts, we're now looking at hikes again. This was not, seems relatively similar to the story in 2020, 2022, 2023. I'm not going to say we're going to go like these jumbo hikes that we saw during that time,

but we're back into a, credit tightening cycle. This doesn't pretend well for the housing market. It's not great. And we have been talking about this for a while. It's hard to see like over the next couple of years that changing. There are lots of companies that will likely be lousy investments for a while in this industry, but they're cheap. Like I was just saying, Linar is trading for less than its book value. Maybe they're good investments for like five to 10 years, but I think a lot of people be like, well, I don't know if I'd necessarily want to wait five years to wait for a payoff that may or may not come. So looking at it and being like, it's okay, there's maybe something

worth getting at here. What are some companies in housing-related stocks that actually have near-term catalysts? Well, as far as the risk spectrum goes, you're going to be far less riskier with Lanar than the company I'm about to mention, but I do want to highlight figure technology Solutions. That is ticker, ticker symbol F-I-G-R. I believe that this business could enjoy some tailwinds given the market dynamics that we see right now. So figure technologies, what exactly does it do? So figure technology solutions is a technology platform for home equity line of credit origination. So He-Lock origination, it is a tech platform for that. It is built on blockchain technology. The value proposition is that it can originate some HELOC loans faster and more cost-effectively

than maybe some other things that are out there. Faster and more effective. It sounds great for the business. But I guess my question is, how does that translate to like cheaper rates for investors or I guess lend or people who want to take out HELOCs? Because one of the things that has really shouldered companies like Home Depot and lows and home improvement stocks and a lot of these others is that. people aren't using helox because the rates are too high.

Is what figure does actually designed to bring down rates, like they're more competitive than your traditional market? Can be, can be. It's certainly kind of a little bit like, it's reminiscent of upstart in a way. It's trying to match credit profiles more effectively than the traditional methods. But, you know, I push back a little bit because the trends are showing that with more people being locked into their rate,

they do still want to access that capital that they have tied up in their home. And traditionally, they've done that when they've sold perhaps, or they refinance, and that's how they get it out of there. It's kind of trapped right now, and they still don't want to give up those mortgages. So the home equity line of credit, maybe not what it's been in the past, but it is showing an uptick here recently. People do want access to that cash. And so the tailwind is there. What's so good about figure, in my view, is that it's not actually shouldering the financial risk that comes with the HELOCs themselves. It's essentially partnering with other financial institutions. So they're the ones adopting its platform to originate more HELOCs. And that is why it's able to enjoy less risk, perhaps, and also

great, great profit margins. So you look at this thing, 42% operating profit margin, 39% net margin. This is actually a really, really profitable business and growing fast. Certainly the idea of like partnering with somebody who doesn't actually have to lend right now sounds a little bit better or more appetizing in this certain environment. But Matt, I have to imagine that's not the only place. I agree that things are not going to get better quickly for housing. I've kind of changed my tune on that. Anyone whose thesis is rates are going to go down needs to really.

think there's thesis right now. I mean, they just say that's just what has to happen. And to be honest, I have no idea where mortgage rates will be in six months, one year, et cetera, and neither does anyone else. Even if the Fed does exactly what you expect, mortgage rates don't necessarily track what the Fed's doing. For near-term catalysts, I'd make the argument that the best bets are on the landlords, not on the home builders. And what I mean by that is a higher interest rate environment for longer means that more people are going to be renting than buying. There are two real estate investment trusts that focus on single family rentals. They're called Invitation H, InVH, and American H for Rent, not the most creative name in the

world, but ticker symbol there is AMH. American H for rent is especially interesting because they're kind of insulated from that new federal mandate that, you know, large investors can't buy single family homes anymore. They're more, they like to build instead of buy their homes to cost advantage. if they do it will. It could also be a near-term catalyst for the home builders. When our CEO specifically called out built-for-rent housing, a lot of these companies are partnering with builders as a bright spot in the quarters. But I mean, I would sum it up by saying, I don't know if the home builders are necessarily a five to 10-year investment. As you mentioned, a lot of them are trading

below book value. It wouldn't take much good news to cause the market to rewrite these. I mean, home building has been weak for a while and these stocks traded for a lot more than book value for a while. I mean, like I said, Lenar only fell 2% on a double, double miss, a guidance cut, terrible CEO commentary. I mean, I agree that my thesis with home builders is a five to 10 year one. But right now, the short term downside risk reward profile could be more favorable than you think. Look, I don't want to come off as being like, look, I think home builders are lousy.

you'll actually find one or two in my own investing portfolio. So it is something I have bet on in the past. It's an industry. I do and plan on keeping invested in it in the future. It's just that it's hard to, you know, see the short-term catalysts that are going to be like, yeah, we need to do this now. For me, it almost seems like an investing window. I personally don't have, like, take any contention, be like, yeah, I could be lousy for a year or two.

It's just hot can be a challenging thing for investors we're trying to get into this. But that's one of the challenges here is being able to see through the shirk term noise and make those long-term investments that are actually going to work. And on that topic, not only do you have the apathy cycles like we have here with housing, you can also get into hype cycles. And that's what we're going to talk about after the break. They say leadership isn't just about where you're going. It's about the conviction it takes to get there.

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discussions in the markets newsletter was the fading fortunes of the nuclear trade. I think last year we saw a lot of investor enthusiasm for nuclear stocks because of all the demand for power, electrification of everything, AI infrastructure, you know, where are we going to get all this power? oh, it's going to come from nuclear because it's cheap, it's clean, it's, you know, we're not dependent on other nations for it with fossil fuels, all of the arguments that it had. But as of today, most of that of enthusiasm has faded. And several of those highly touted nuclear stocks are now down 50, 70, I think one of them's even down like 88% from their all-time highs with, I think it's fair to say little change

to the business outlook for the industry. I don't want to get too deep into nuclear specifically. I think the topic here is investing in hype cycles because there's probably a lot of investors who bought into this hype cycle around nuclear and are sitting on huge losses. It hits an immense challenge for investors. It's identifying the durable business trends versus getting caught up in the hype cycles and trying to separate one from the other. There is probably a durable trend here in terms of growth of nuclear power, more power to

And in general, but obviously there was a lot of hype that left a lot of investors burned. I've certainly gotten burned before. I think my biggest fault was betting too hard on shale drilling in like 2013, 2014 being thinking like, oh, it was going to revolutionize the industry. It did. And it kind of ruined the industry at the same time. And we saw lots of bankruptcies, lots of stocks basically go to zero. I think I had maybe one or two of them, I think C drill. It's one of the companies I had.

But guys, I'm assuming you guys have also had similar experiences of getting burned on these hype cycles. Yeah, I mean, you're right. Nuclear stocks have been declining for a year now. It's some big lessons to learn there. I think you're talking about Aucla with the 80% decliner. It was almost $200 in 2025. Now it's about 40. One of the biggest lessons about trends, and it applies to nuclear, is while investors can be directionally right,

I don't think any of the three of us think nuclear is going to play less of a role in the power landscape in 10 years than it does now. Things like valuation and company specific investment thesis, they still matter. And you're right. I've been burned by trends before. I'm going to call myself out big time here. My big one was the 2020 to 2021 spec boom, which I wasn't the only one. You can't tell, but I'm looking at John right now. We both kind of had some duds in that era. thankfully I limited my positions for the most part I think John did do but I invested in several companies and we had some overlap here that were very hyped and we're trading for valuations that simply didn't make sense and I'll call out three of mine one was a company called 23

and me which a lot of people know they're the genetic testing company there's one called latch which don't even get me started on that one because I might shed a tier or two and then there's offer pad which you know the future of real estate they all had revenue but not that even remotely justified their valuations. The projections were compelling. And for a while there, for a while there, investors were driving these companies higher and the momentum seemed reasonable. And money was free. These companies could borrow money whenever they wanted to. But if I had just used a little quick hype check, it would have prevented some of these losses. You know, does the company have revenue, real revenue today, or is the valuation mostly based on projections? Latch, for example,

had pretty crazy projections that, you know, in hindsight, didn't make sense. The other question, how many things need to go right before the business is truly worth what I'm paying? 23 me is a real business, but a lot had to go right. Their whole thesis was based on, okay, we're going to use all of our genetic testing data to develop drugs, which in itself is not a guarantee, how many drugs actually make it through the trial process and into production. How many of those actually make the money back that it cost to develop them? A lot had to go right.

That would have stopped me in my tracks right there if I just used that. And another question to ask yourself in trends like nuclear, is there a, quote, boring company that will make money and do well from this trend, even if the trend fizzles or takes a while? That, by the way, is why I'm using IBM to play the quantum computing trend and not one of the peer play quantum stocks. So I've been burned by trends. All we can do is investors is learn our lessons and apply them in the the future. Yeah, for me, personalized health and fitness, you know, I still think that's probably a huge long-term trend, but I really saw it playing out a lot faster and a lot differently than it

has so far. I really thought that wearable devices were just going to revolutionize both of those spaces. I could envision a reality in which you're wearing a wearable device. It's tracking all of your important health data. And that is then transferable to a connective fitness device, such as a Peloton, or transferable to a remote doctor consultation such as through Teledoc. And both of those are companies that I really saw as the trend is here. It's now. It's big. It's going to be fast. And both of those found their way into my portfolio. And both were incredible losers from there. I think it probably still is a long-term trend. but perhaps a little bit too fast too soon

and the businesses were not quite ready to take off the way that I envision them. It is always one of the more frustrating things is because there can be durable trends behind them. I think perhaps one of the more frustrating things is watching a company be able to tap into that trend but not execute on it. I think there's a couple examples here.

You know, companies, you know, there is something there to the idea, but they're having the execution at the business level to translate that into actual revenue and earnings is always a different story than the actual trend itself. Back in the 90s, you know, there was like this researcher at Gartner. It developed, it was called the hype cycle for emerging technologies. And I feel like a lot of things we're talking about here really falls onto that. You know, you have the rapid early innovations.

It comes with this, they call it like the early enthusiasm. And then after, like a lot of these trends here, that goes through a trough of delusionment and then this slow and steady march towards actual progress where the promises of the tech become realized and then plateau of productivity. It's here. It makes sense. It's a mature market now. Not everything follows us to a precise thing, but it tends to go along there.

And there are plenty of examples who investors have been immensely successful in all of them, investing early, maybe you're waiting for the hype to die down. waiting until it's actually productive. Like, the best part about investing is you can find success in any of these flavors. Well, Tyler, I do think that we need to distinguish between the business hype cycle and the investor hype cycle because they're not necessarily the same. To circle back to nuclear, I mean, some of these nuclear stocks out there are pre-revenue, and they're expected to be pre-revenue for perhaps the next five to ten years.

You're not investing in a business at that point. you have to have a really good reason to invest in a pre-revenue company. What does it have that is going to give it some sort of any quantifiable competitive advantage or edge or hope that it's going to be a big winner when it's not even generating any revenue yet, right? So there's an investor hype cycle that definitely comes to bear often in investing. There are also business hype cycles. And so those are a little bit different.

So just a few years ago, if you could count up. mentions on company earnings calls, and it was all about Metaverse, Metaverse, Metaverse. We're doing this in the Metaverse, doing that in the Metaverse. And I think these companies really were trying to say, oh, here's this emerging technology that we've got to be a part of. And so they were leaning in that way. And turns out, okay, there's not really anything to monetize there right now. So, you know, business hype cycle was right there at that hype.

And now I'd say you're down way, way down when it comes to expectations for the Metaverse. Does it ever march back? Who knows? Blockchain was also another area. But, you know, there's definitely a difference there between what investors are hyped about and what businesses are hyped about. Yeah, I feel like there's a former Web 3.0

or whatever that was in there as well. So, but with all the different flavors of hype cycles, whether it be business, hype cycles, investing hype cycles, you know, everyone has their own flavor. But for you guys personally, like, where have you found the? most success as an investor. Are you jumping early and ride it through the hype or wait until the market has maturely developed? I can say from personal experience, I'm really lousy at jumping in

early. And so I have found that I am more of a wait for the market has developed. Maybe that reflects on who I am as a person and might shape why people may or disagree or disagree with me. But, you know, where do you land on that spectrum? Well, same zies there, Tyler. When I have I've jumped in early on a trend. I'm definitely wrong. So one trend that I jumped in on early and I really thought that I was smart was ghost kitchens. I thought that that was going to be a huge trend. I had some investments that went to zero because I thought I was getting in early on a real trend. I had some validation there. You know, former Uber founder, Travis Kallanick, he was putting his eggs in the ghost kitchen basket really did not pan out the way I thought it would.

So my biggest gains, and particularly dollar gains, have come from a very simple business called Five Below. There is nothing revolutionary about selling stuff to teens and preteens, right? But the business model made sense. And by the time I invested, it was already well established and was already a substantially large company. And so I did not get in from the beginning, but I've still made a lot of money investing in something fairly simple. So we'll say you are a productivity plateau investor. Matt, what about you? I've made money getting in early on the hype cycle and made money waiting until the market's developed. I've gotten burned by investing in the middle of those two.

So one example I bring up from my own portfolio's block, formerly known as Square, I invested early just a few days after its IPO. And I invested in a fintech at a time when most in-person transactions were still made in cash. you know that you could you know paying with a credit card at your local farmer's market wasn't a thing when I invested in there so investing early has me sitting on about an 800% gain in my portfolio in in block right now even though it's cooled off um investing at peak fintech hype in about 2021 would have me sitting on a 75% loss if I had invested there but now that the market has developed and we kind of see what's what with fintech there are some good good opportunities block. itself trades for less than 20 times expected earnings this year. PayPal is another example of one that is more of a value stock right now.

So I've made money before and after the peak hype, but never never in the middle of the hype cycle. Well, if there's one lesson we can take from all of us, be very, very skeptical at the top of a hype cycle. We'll hit the mailbag after the break.

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You want to get an email to us? It's podcasts at fool.com. That's with an S. And if you need it, it's in the show description. Today's question comes from Greg St. Clair. It's kind of a little bit on that apathy, hype sort of, cycle and also we've had a discussion a lot about volatility lately. And so he has a question about 10% corrections specifically. Hi friends. Hope you ever having a good week. I've been loving

the discussion about potential 10% correction in the market and stocks and whatever. On the side for arguing there will be a correction in the market. And it's not an if, it's a when. It happens. We see cycles happen all the time. What is a company you're making sure you have in your portfolio? And thanks from Greg. John, what do you got? Yeah, I absolutely love this question because I've been thinking about it. I actually have a decent amount of cash in my portfolio. So I am thinking about what I would buy if there was suddenly a 10% or more correction. I just want to preface this by saying waiting for a correction to invest can actually be dangerous. Compounding is your friend in investing and time is the friend of compounding. So the longer we wait for correction to actually invest in something, the more we're actually kind of pulling away. from our long-term potential because the best companies out there are compounding right now

and creating long-term shareholder value. You want to be in on that. But to directly answer Greg's question, I mean, my highest conviction businesses are already in my portfolio for the most part, right? And so if we had a market correction and some of my higher conviction positions fell substantially, yeah, I mean, I already own a lot of Mercado Libre,

but if it was to fall 50% or something in a market correction, I would have a really hard time not buying a lot more of that company, given my conviction, to quote Warren Buffett, when it rains gold, you don't want to put out a thimble, you want to put out a bucket. And I would put out a bucket if Mercado Libre was raining down. But, you know, as far as a company that's not in my portfolio right now, that I would like it to be, Axon Enterprise is at the top of the list, and that is ticker AXON. This is a great company, law enforcement technology. a lot of avenues to grow its revenue base and profit for shareholders. I used to own this. I sold on valuation. I've regretted it ever since. And I've been waiting for an opportune moment.

And if there was a pullback here, I think that it would find its way back into my portfolio. For very averaging into positions, this is kind of what I do. It's a close cousin to taking nibbles like John does. And that's what I've been doing. John's right that waiting for corrections is a losing battle. And I'd also add that with bond yields today, you know, The Fed just made a rate hike. You know, you can get 4% on your savings.

You can get 5% from 10-year treasuries. Having cash, it actually earns something. The opportunity cost of holding some dry powder is not that bad. But to more directly answer the question, my favorite correction stock that I own is Brookfield Corporation. I don't want to talk too much about Brookfield because it's a lot to unpack. But the company makes a lot of its money by buying assets when everyone else is panicking and selling.

Berkshire is another great option. They have $365 billion in cash. Great position to benefit if we see a market correction. But like John said, I already own most of my highest conviction stocks. I'd add to a lot of them if the market were to fall significantly. Those are the two that I think would have come out of a correction better than they went in. I'll say to Greg's question, and this is perhaps an unsatisfying answer, but with market-fit volatility these days, I don't even know if a 10%

10% correction or any 10% movement is really going to change much in terms of how I'm thinking about stocks or investing because things are moving so rapidly in any given moment. If you want to come back and we'll talk about 20, 30% market corrections, we can do that. But otherwise, we'll just keep with that. As always, people in the program may have interests in the stocks they talk about and the Motley Fool may have formal recommendations for against. So buy ourselves stocks based solely on what I'm here. All personal finance content follows Motley Fool, editorial standards.

and is not approved by advertisers. Advertisements or sponsor content provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks for producer, Bart Shannon, and the rest of the Motley full team. From Matt, John, and myself,

thanks for listening, and we'll chat again soon.