The Best One Yet - Scotts Miracle-Gro’s pot side-hustle, Fitbit’s 14% plummet, and the Fed’s historic decision

Episode Date: August 1, 2019

Turns out lawn phenom Scotts Miracle-Gro has been enjoying a sales boost by equipping cannabis producers to grow indoors. Fitbit plummeted 14% on a struggling new smartwatch, but its future could be Apple-style services. And stocks plummeted yesterday because of the Fed, so we break down why.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. This is snacks daily. It is Wednesday, the first of August. And it's the best one, yeah. This is the best one we've done in August. Now, the markets, the markets had their worst day in two months because of the Fed. Kind of the worst one yet within two months.

The Fed is our third story of the day. We're going to get into that a little bit. In the meantime, that's these three stories. First is Scott's Miracle Grove. This is a perfectly legal, perfectly wholesome, perfectly inconspicuous cannabis company. It's just a carrier. It didn't know where it got it. doesn't want to talk about it, no idea, can't get into it.

Scott's is basically a pot accessory. That's what we're trying to say. Second story is Fitbit, the San Francisco-based health tracker company. Stock plummeted after its latest product kind of flopped. We got a prescription for Fitbit. Just do what Apple's doing. Third and final story, the Fed just did something historic. It lowered interest rates for the first time since the financial crisis.

We're doing a snack-style history lesson. But before we jump into that, we have to issue an apology. Grab your copy of the Quibbler. It's Harry Potter's birthday. Jack, I got one in hand, except it was. technically yesterday. It was yesterday. My Quigler showed up late. This is a belated one. July 31st, 1980 is when Harry Potter was born. Remember it like it was yesterday. That makes him a whopping 39 now. He's pushing 40s. Very firmly in the middle-aged category. He's got that wrist arthritis

from all the wand waving now. I heard he got a peloton to get back in shape. Hope Hogwarts has some good health insurance. Now, July 31st is actually also J.K. Rowling's birthday. Interesting coincidence. The seven books. Little narcissistic, but we'll let out slide. Now, Harry, class. Sick Leo born in July. This is a good resume right here. President of the DA. Technically. Becomes a wizarding cop,

a.k.a. An aura after Hogwarts. Now, Harry, we want to give you something like, for example, the fact that the first book in the United States was printed in where? The first U.S. edition of H.P. printed in Brattleboro, Burmont, my hometown. It's 1997. Now, favorite Harry Potter vocab is either snogging.

True. Or bloody hell. I just like schedule because it's spelled the same as schedule. So, Wingardium Leviosa. 500 million copies of Harry Potter were sold worldwide. Harry, send us a snack back to the day already. I don't know what's taken so long. Happy boy to Brentland.

You're tuned in the snacks daily. We spoke to the lawyers and we got to get something legal out the way. The snacks about to hear ain't food. It's air candy. They don't reflect the views of the Robin Hood family. It's all informational just so. You know, we're not recommending any securities. It's not a research report or investment advice.

Not an offer or sale of a security. Right. Snacks is digestible. Business news for you Rapperhood Financial LLC Member Fenra Slash SIPC

For our first story We're going with a wild one here Scott's Miracle Grow The stock just jumped 9% Because of indoor pot growing First of all Scott's Miracle Grow has a publicly traded stock Shocker value

About a fourth of a lift 5.5 billion approximately Now this company goes back Legendarily 1868 That's when like the Transcontinental Railroad Was built We're talking civil

war era. It's based in Marysville, Ohio, which is right in the heart of Union County. Good old Union County. We got to have at least one snack out there as a Union Countyer. Now, part of the division is the Scots that your dad knows. You know what we're talking about here. You get like the grass seed that grows well in shady conditions. It's got lime in it. Huge bags of lime. No idea what lime is. grew up in the city. I didn't touch a long to always eat. It has something to do with a pH level. It seems like it would hurt. So we're talking about the Consumer Lawn and Garden Division. Right. Now, 80% of the sales of Scots are going to like coming from Costco, Home Depot, Walmart, Ace, Lowe's, your classics. And it's like dad and mom, you know, going there on a satellite.

A whole afternoon there. Home landscaping. Boom. Consumer lawn and garden, that's like a steady industry. But here's the thing. Sales at Scott's Miracle grow rose 18% last goal. So we looked into the snacks aisle and noticed it came from one particular division. Hydroponics. Exactly. Indoor hydropronics. They've got a brand called Hawthorne that's all over this thing. All we're talking about is growing things. Indoor. Right. Hydroponics is a fancy way of saying you didn't use soil, but you grew a plant. You didn't use the sun either because you're indoors.

Exactly. So Scott's Miracle Grow sells lights that emulate the sun, nutrition like fertilizer. Sounds important. And, you know, other greenhouse stuff. Right. Picture the show weeds on Showtime, but instead like some Canadian dudes backyard. Yeah, yeah. It's not a California basement. No. It's a Canadian. And the other states that are legalizing cannabis.

Could be a Colorado woman. So we looked at the company's slide deck to investors, and they said that they sell hydroponic equipment to professional growers of quote unquote specialty crops. They've got a quote unquote technically trained sales team who will use great discretion and respect your privacy. Three winks thrown in there and like maybe one or two arm motions. Sounds like we know what these guys are sales. Sales of that division rose 49% compared to last year. Actually, they rose 138% if you include an acquisition. It acquired a company called sunlight supply, which again, Yep.

Is emulating the sun. So, Jack, what's the takeaway for our buddies who are just up to a lot of things over at Scott? Quote, unquote, things. Trends are like onions. They have layers. The cannabis industry, it is growing because the stigma is being released as gets legalized in more places. And guess how cannabis is best grown. Not outdoors.

Indoorse. I like that. It is cultivated indoors. Process of elimination there. And guess who's a leader in indoor and hydroponic growing? our buddy Scott. Scott's Miracle Grow. For our second story, Fitbit stock just plummeted 14% because the big product that just

bet on kind of was a flop. It was a flop. It wasn't working out while. Now, the opening sentence of the quarterly earnings report that came out yesterday. Where are you going with this? While we're disappointed, blah, blah, blah, blah, blah. Do you need to say more? You had us at while.

It was a disappointing quarter. Apparently. You got to get that out there. Fitbit, we get this. So after the stock plummeted, it's now worth less than. $1 billion. Right. So technically like a unicorn is a private company that's worth more than a billion. This is a public company that's now worth less than a billion. So we're going to call it a U-Turnacle. We're not sure if that's going to take off. We hope it does. Have fun with it.

It's so the company IPOed in 2015. It's based in San Francisco and the stock is down 82% since its IPO. That's basically because the competition at first was Garmin. Yeah, because it makes fitness trackers and smart watches. And then, you know, Apple decided to jump in. Yes. The Apple watch came and things have not been rosy since. You can like point to the day. The company's mission is quite worthy. Yeah. To make everyone in the world healthier. That's great. Michelle Obama. It's got fitness tracker, smart watches, and no bestselling book, though. Now here's the problem. Smartwatch revenue fell by 27% last quarter. And when we're talking smart watches, we're talking about like 40% of the company's revenues. So the company was betting big on this new

thing called the Versa Light, which came out in March. It's a smart watch and this thing was kind of set up for failure. It's a lighter smart watch. Right. It's called the light. If your wrist down on it, it was like teeny and really struggling over here. I think if you squint your eyes,

it looks pretty much like an Apple Watch, but if you unsquint them, it's not an Apple Watch. If you really squint them, it kind of looks like a Skittle. We noticed. The price is $160, which is only $40 less than the non-light Versa.

Yeah, they're not calling it heavy. It's just regular. By the way, they're like two other Fitbit products who have like the same price. Now, the problem here, For $40 less, you know, you're saving some money, but that's at the expense of some serious features. Right. Another issue is deficiency.

So this doesn't include counting like stairs. It can't track your elevation. Yeah, the smartwatch versus light can't like play music when you're working out. No, and I think that's kind of important to have a music feature. If I don't have that cheering in the background, I'm not doing a wrap. So it's a smart watch, like technically, but it's basically just a fitness tracker. Now, because of all this, because the sales of this weren't impressive for this specific item, Fitbit actually warned investors, hey, the rest of the rest of the car,

of 2019, not going to be as good as we expected. Yeah. In fact, we're going to have 95 million less sales of the Versa Lite than we expected before, so that's going to hurt. So, Jack, what's the takeaway for our buddies counted steps over at Fitbit? Fitbit needs to pull an Apple. Remember, this week, we spoke with you about Apple's earnings. They've been making a pivot from, like, physical devices to services. Yes. Apple used to be like 70% reliant on iPhone sales. Now it's less than 50% because it's making money off services. news plus Apple Music. It's making recurring revenues. Now, Fitbit actually has a service. True. It launched it recently. Fitbit Health Solutions, which is like companies get to use this

and they use Fitbit products to like help their employees stay healthier. Yeah, it's still a small percentage of overall sales, but that small little slice is growing in size. It rose 42% last quarter. Now, this includes like coaching in like an app, like personal wellness focus, tips. There's a competition thing. Actually, it could be like a really good team builder at a corporate This is big. How many steps did you get? How many stairs did you walk today? You could have like a step off, you know, in the accounting department. How's Julie so good at stepping? Maybe we want to blowshy. You get to download the app and share your fitness. Even your like sleeping and even your consumption data, if you really want to go full transparent. It's a great sign that Fitbit can emerge from its problems by focusing on services, pulling an apple. And make money off the devices. It's already sold to people. For our third and final story, we've got to talk about the Fed. The Federal Reserve, it just gave markets a pony. But investors wanted two ponies. Classic.

So they did what any petulant child would do. They sold all their stocks. This is the U.S. Central Bank. It's also known as the Federal Reserve Bank. It's also known shorter as just the Fed. And we're talking about our friend Jerome Powell, Jerry Powell, the chairman, great snacks listener. He announced his new interest rate policy.

Specifically, he's going to lower interest rates across the whole economy by 0.25 percentage points. Aound small. Sounds really small. It's actually a historic. moment that that happened. Yeah, it is ultimately going to lower like savings account, rights, credit card rates, student loan rates, car loan rates. Anything you're lending or absorbing or borrowing and the rates involved. Now, the reason Jerry Powell felt the need to do this is because

partially the looming trade war that's causing uncertainty. The other issue is that prices aren't rising and in a healthy economy, you need some like a healthy little bit of inflation. Prices to rise. Yeah. And lowering interest rates can cause a little bit of inflation. Okay, so for critical context here, we're going to go back to the last time this happened. The last time interest rates were lowered. They were lowered during the financial crisis. We're talking over a decade ago. It was a scary time. Right. Interest rates were getting slashed in effort to just boost the economy. Not just boost it. Rescue the economy. Not just rescue, save the economy. Salvage the economy. Shelter the economy. Rescue and save is kind of a series up right now. So when you lower interest rates, you get people to spend money, maybe even spend money they don't have on their credit card.

Right. Because if you're a borrower, that means it costs less to borrow money. It's easier to borrow off the interest rates or borrow money. Maybe you use that to start a company, pay your friends back, do a lot of things by stocks. In fact, lower interest rates are bad if you're a saver because now your savings account makes you less money. Your money is sitting in there. It's not earning any money. Right. So what we hope happens here is that you take money out of your savings account and you invest in stocks or you invest in like a pool in the backyard or you start a business or something. That's the goal of the Fed. That's why interest rates would be taken down.

So, Jack, what's the takeaway for our buddies over at America's central bank, the Fed? Investors wanted more. Let me take you back to another more recent time, December of 2018, just a cool like eight months ago. That is when the Fed completely changed its tone from like, we're going to keep on increasing interest rates to suddenly we might actually lower interest rates. Right. As you know, from listening to snacks, the economy has been growing strong and steadily. there's not as much of a reason for lower interest rates. Last year, the Fed increased rates by four separate times. Since then, U.S. stocks have been up on quite a roll, 29% since December. And that's because investors expected an interest rate cut like what happened yesterday. It was baked into the expectation.

So you're probably wondering, interest rates go down. It's good for stocks typically. Why would stock suddenly fall when the announcement yesterday was that interest rates were going down? investors wanted two ponies. They wanted more. Basically, the Fed also said, yes, we are cutting interest rates, but we're unlikely to do it again in the near future. Deal with one pony. So the Dow fell 300 points. Jack, can you whip up the takeaways for us over there? The Fed cut interest rates, but investors were bummed.

It might not do it twice. You can't always get what you want with Jerry Powell. Fitbit stock dove 14% because its new smartwatch isn't selling that great. But plagiarizing Apple's growth strategy could help. services. That's the word. Layer. Third and final story. Scott's Miracle Grote used to be a lawn care company. Now it's kind of a cannabis company.

Trends have layers and this is one of them so is discretion. Now, time for a snack fact of the day. Jack, can you give a little background here? This one is brought to us by my beautiful fiance, Alexandra. It was mentioned in passing, but we looked into it further and we were very curious and we thought it was snack fact worthy. We were driving in the car when we heard this on speaker. I'm like, that's a snack fact. Full disclosure, if it's incorrect in some way and we're proven wrong, Alex will.

She'll have to, she'll crash. So, the University of Delaware has one of the only female sports mascots we can think of. We're talking the fight in blue hands. Now, we tried to find another. All we could find was the University of Akron. Akron, the Zips. The Zips. Which is a female kangaroo.

Exactly. Great, great move by U.D., U.S. Delaware. Snackers, if there's any more we're not thinking of, let us know. Hit us up at Robin Hood Snacks on Twitter. Now, another key story you got to keep in mind today is that Spotify released its earnings report, and it looks like podcasting has been a boon for the company. And it's got 232 million users. Snackers.

You guys look great today. We'll be back tomorrow. We're the same thing. Talk to you, Ben. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, Inc, or any of its subsidiaries or affiliates. The podcast is for informational purposes only, is not intended to serve as a recommendation to buy sell any security and is not an offer or sale of a security. The podcast is also not a research

report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC member FINRA SIPC.