The Best One Yet - Warren Buffett bets on Restoration Hardware, Pinterest is too nice, and Peloton follows Tesla’s playbook

Episode Date: November 18, 2019

Fancy home goods chain Restoration Hardware jumped 8% after an investment by Warren Buffett’s Berkshire Hathaway… and it’s totally not Warren’s style investment. Pinterest is such a nice social media company that it’s not throwing enough advertising at users. And Peloton will reportedly launch 2 new products in 2020 as it uses Tesla’s playbook.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. Welcome back. It is Monday, November 18. I had a great friend's giving this weekend. Jack, my back still sore from surfing two weeks ago. Okay, we got three great stories for you, Snacks. In case you're wondering, this is the best snacks daily we've ever done. T-B-O-Y. Thank you for reminding me. The best one yet. First story, Restoration Hardware stock jumped by 8% on Friday from an investment from Warren Buffett. And this is so not Warren Buffett. He's out of his comfort. zone on this one. This is actually bizarre. We're going to jump into it. PUNN not intended. Second story. Number two. Pinterest, it's helped you find Halloween costumes, DIY style several years in a row.

Plenty of profit puppies. But it has a profit problem. It's too nice a social network. Honestly, it needs to be slapping more ads in there. Do more. Pinterest, do more. Third and final story, Peloton is reportedly launching a cheaper treadmill and a rowing machine next year. It's following the old Tesla playbook. Jack, what do we call it? Skim. sync. Two key words there. Now, Snackers, before we jump into that, we've got a public service announcement for you. Do you pay $13.99 for Netflix every month? Do you refill your soma water filter every three months? Do you pay Harry's Shave Club monthly for razor refills? If so, you could be suffering from subscriptionation. And if your subscription lasts more than four hours,

call the doctor immediately. Immediately. Now, subscription is when you have so many subscriptions going on on a monthly and quarterly basis, your brain is overwhelmed with paying them, keeping track of them, and managing it. You're just fed up. So Apple is considering a solution for all of you Apple folks out there. Right. One subscription, one bundled subscription that includes ICloud, Apple TV Plus, Apple News Plus, Apple music, and whatever else Apple throws.

It's one subscription to rule all your other Apple subscriptions. Actually, I got to correct you there. One subscription to rule them all was Adam Newman's ultimate dream of the Wii company. True. Adam Newman had this vision where you'd be paying for your rent, for your office, for your food, for your child care, for your dog. All with we something. $5,000, you pay for nothing else. That was Adam Newman's plan. Apple is trying to fix subscription. Adam Newman tried to do it first. 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 the hair ain't food. It's air candy. They don't reflect the views of the robberhood family.

It's all informational just so. You know, we're not recommending. any securities. Nope. 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.

Robberhood Financial, LLC, member Fenra slash SIPC. For our first story, Warren Buffett's getting way out of his comfort zone with a big restoration hardware investment, Jack. Have you seen the Chesterfield collection? I wish I had. Talk to me. Tell me on this thing. It's got Italian performance melange weave.

I'm following you on this. My skin's like trickling up. Do you know how much the 10-foot Chesterfield collection sofa costs? Sofas are intense. I'm going like, I don't know, $2,500, $3,000? For a third of it, this thing is $8,795 for a sofa. You got to crowdsource all your friends. You can buy a single sectional on this thing.

We're talking about Warren Buffett, aka the Oracle of Omaha. When he invests in a company, the stock jumps because you're like, I want that company. Case in point on Friday, restoration hardware stock jumped 8% because he invested to get 6% of the company. A lot of percent's in the story. Yeah, stock was up 8%. He has 6%. Now, Restoration Hardware has become a lifestyle company. It's not just selling wildly expensive furniture. The CEO is really proud of what he's done because he's taking like the opposite approach. Instead of going all online, this guy's going offline. Everybody else is closing stores. He's opening 70 new stores this year. Not just any stores. These restoration hardware stores are like opera houses.

We've talked about the one in New York City's meatpacking district. It would cost $50 million. to build? A single store. And we've called it a good first date spot, but only go in there if you can afford an $8,795 couch. I think this is more like a second, third date spot, too. You just keep going back there. It's entertaining every time. Let's get back to the lifestyle company claim. Please. Restoration Hardware has a ski house and a beach house, really thick catalog with nice paper. If you buy anything from there, they're going to send you this catalog. It's so thick. This thing is almost a weapon. You would need a ski house just to put it in. You need a three-car garage for this thing. Now, back to the lifestyle thing, one more time here. They're a

membership company. You become a member of Restoration Hardware. All right, so they're selling furniture, but they're not just a store. They are a membership store. All right, so how does this work? Well, first of all, they price their couch at $8,795. Okay, there you go. And then they tell you it's 25% off if you're a member. And guess what? What does that mean? It's only $100 to be a member. So for that sofa, you're saving $2,000. You've got to become a member. You got to become a member. So that's Restoration Hardware. But then you're paying that every year. If you're a member, you're a member. Now, that's Restoration Hardware.

We've got to talk here about Berkshire Hathaway, though, because that is the investment fund run by Warren Buffett that invests in a lot of interesting companies, and they got a thing for furniture. They do. Nick did some due diligence in a lovely magazine, not as thick as Restoration Hardware. Let me tell you,

Furniture Today. You get into Furniture Today on the first page. You are going through all the way all the pages. Berkshire Hathaway owns stakes in the Nebraska Furniture Mart, R.C. Wiley Home Furnishings, Jordan's Furniture's and a couple more. Sounds like a lot of furniture stores, but get this. Restoration hardware is way bigger.

It has more sales than all of those other companies combined. But Restoration Hardware is way fancier. Yeah, those other items, there's a lot of faux down and pleather there. You're not seeing that at Restoration Harbor. When you're splurging on a few sconces, you're going to notice that sofa, Jack, mentioned, is made out of extra virgin Snow Leopard. So, Jack, what's the takeaway for our buddies over at Restoration Hardware in Berkshire Hathaway? This is Warren's most unwarran Buffett investment ever.

Warren Buffett is an investment legend who loves value stocks, stocks that make an 89-year-old native Nebraska feel safe. He is a frugal man. He was raised during the Great Depression. He worked as a stock boy for crying out loud. What is a stock buy? Is that even exist anymore? No one has any idea.

Now, some more typical Warren Buffett investments. Lay on us. If you buy stock of Berkshire Hathaway, you actually own parts of these other companies, Geico insurance, American Express, Costco. He also invested in an oil company in this last quarter. He's invested in railroad companies, banks. These are all like traditional blue chip companies. Delta, craft, Coca-Cola.

Companies that have a reasonable stock price, but high and consistent old-school earnings. Restoration hardware to Warren Buffett is like Nana signing up for tough mutter. This thing is shocking. It kind of makes no sense, but we got curious. For our second story, Pinterest is a hefty nine years old, and it's never profited because it's being too nice. Come on, Pinterest. Jack, can you give us the best description of Pinterest we've ever pinned? It is an online repository of ideas.

That explanation came from a friend of ours who works at Pinterest and is very self-reflective. Great guy, but the way we like to describe it is a social media platform for creative brain skull. Where am I going to hang my Western Antelope skull on that wall? How should I design my custom barbecue sauce bib for the Bachelor barbecue? And then finally, Jack, I don't know if you want to take credit this for not, but at Jack's wedding they had lovely floral cocktails. I know where you got this. Well, do you know what the cocktail was called? Tell me.

A T-Boy Tequila. It's a brilliant name. I know you came up with the name. Pinterest came up with the look. Pinterest stock is down 35% since its IPO week, partly because it is still unprofitable. Jack and I have noticed this one huge problem in particular. It's being too nice to foreigners.

Which sounds insane. Let me explain. We're going to go into the details on this. Let me explain. Because we're totally supportive of foreigners. Now, the United States is where 27% of Pinterest users are from. So about a quarter of its users are from the U.S. Not that big.

it's pretty international. There are a lot of users outside the U.S. But the U.S. is where it gets 90% of its revenues. It's like its American users are power users. Get this. For each American user, Pinterest makes $11 per year. For each international user, it makes just 41 cents per year. It's competition we're talking like Facebook, Twitter, other U.S. tech companies, social media. They have way more of a balance between how much money they're making off of foreigners and Americans. Although Facebook, Twitter, and all those other tech guys.

They're still better monetized among Americans for a couple reasons. Okay. First, these companies want to make sure a product actually is traction before they start sticking ads in it. Yeah, because nobody likes ads and you could ditch. And if you're not, like, addicted to it yet, that could be bad. Plus, advertising is just different abroad. Like, maybe Pinterest is still trying to figure out the right quassant advertiser in France. They haven't done it yet.

So treating customers equally is not the golden rule of tech. So, Jack, what's the takeaway for our buddies over at Pinterest? Pinterest, stop worrying about being mean. It's the nice platform. It's the nice social media platform. It's almost too nice. There's no like counts. They're not going to stress you out about like anxiety.

No, you get on there. It's full of positivity. Deborah, love what you do with the bathroom tiles. I'm inspired. I can't wait to do it in my home. Instead of Instagram, which just makes you feel like you need to be going on a Hawaiian vacation because all of your friends are. Damn it, Deborah, where'd you get those tiles? So Pinterest, it seems concerned about alienating users with too many ads.

But I got to tell you, stick some ads in there, Pinterest. If you don't profit, you don't have the money to invest in further features that could grow your growth, Pinterest. The fact that Pinterest is barely showing any ads internationally entails a risk. And the risk is that better funded rivals could come in and make a better product. But it also could be viewed as an opportunity because the fact that it's under monetizing itself means it's got room to grow and maybe monetize more in the future. Maybe it could finally get profitable if it just shows some German some ads. So this is the big decision Pinterest faces and maybe it's being a little too nice. For our third and final story, Jack, get into third's position, back in the bike, back in the seat, tap the booty back.

Peloton is reportedly launching a newer, cheaper, couple of products. A couple products. It's Teslaifying itself. It is testifying itself. You'll learn about that in our takeaway. The stock, though, has been having that much fun. Well, it fell on IPO day. It dropped 7% after its virgin earnings report.

And then it jumped 10% on Friday. Finally, Jack and I were curious. So we jumped in. Now, that's not the only issue they're facing right now. Well, Taylor Swift is all up in the news right now. She does a lot of things. She's a great snacks listener. I know, but she has issues with her record company.

But she also has issues with Peloton. Apparently Peloton's been using her music without totally her permission. Rihanna is not a fan of this either. Also a big snacks fan. Hey, Peloton, that $10 Spotify account, you can't just like broadcast that to a million Pelotonista. So it turns out Taylor Swift and Rion, their music's no longer available on the platform that lets you spin connectedly with people worldwide. That is Peloton. All right. But this story is about two new products, which is disappointing because Nick and I

interviewed the co-founder and head of product of Peloton on their IPO day, Tom Cortez. And we were talking and we're like, hey, Tom, is there anything you want to share about cool new products you may be coming out with? And he said no. Waited for Bloomberg, I guess. So it turns out Bloomberg just broke the story, despite Tom, you could have told Snacks Daily about this. What the heck? Dom. So Bloomberg ended up reporting that there are two products coming out next year that they're very excited about. I'm actually excited too. But Peloton hasn't confirmed this. All right. The first one is a rowing machine. I got to say, rowing with a machine. It's aggressive. Great full body workout. You need to use your entire body to pull that thing. And don't rush. Slow back and even slower forward.

Also, in case you were wondering, when the CEO, John Foley, was interviewed an IPO day, he mentioned that he thinks rowing is a fantastic. So they left a hell of a hint there. The clues were there in the entire time. And then they're making a new treadmill, which I assume will be lower cost. It's expected to be. The current one is over $4,000. Now, Jack and I were chatting about this. I got to jump on one of those Peloton treadmills the other day.

Here is what made this thing brilliant. You know when you're on the treadmill and you're trying to change the speed? Yeah, you're trying to stabilize your body and push the speed down button, which is so hard when you're running. You're grappling onto that rail. You're like, go to press it. Oh, my, you fall off. I fell once badly. It's dangerous.

And all you're trying to do is and change the speed from six to seven to eight. So what has Peloton done to? They have a little wheel on the side that slapped them. Yeah, as your hand is going by naturally with your run gate, I believe is the correct term. You slap it and basically that continues your speed. That is innovation. Jack, what's the takeaway for our buddies over at Peloton? It's Teslifying itself.

When you're evaluating a business model, particularly of a new company like we are right now. It's critical that you look for analogies, other companies that have had similar business strategies. Well, it helps you understand what Pelot. is doing. Case in point Peloton. It's got a $2,300 bike, a $4,000 treadmill, and you pay $39 a month to use its interconnected fitness gear. The point here is Peloton is really pricey. It's really expensive. That's been the hardest part about it. Now, let's look at Tesla. It started out with the Roadster, which was really expensive. Then the Model S, which was like $80,000. Then the Model X SUV, which was like $100,000 after adding some rims. But they recently revealed the $35,000,

model three. Okay, so Tesla managed to start with pricing high and then eventually go low. This is known as skim pricing, we're just calling a Teslaification because that sounds cool. Looks like Peloton is starting that. You start with expensive products so that those most willing to pay with the biggest wallets can fund your operation at first. And then that establishes you as a high-end wanted brand. And then you're mature enough, capitalized enough to go mainstream with a lower-cost product. That's what Peloton seems to be doing. Jack, can you whip up the takeaways for us? It's Berkshire Hathaway just invested in Restoration Hardware.

It's a fancy high-price stock that's a little bit different from his typical value investments. Pinterest is still unprofitable, partly because it's not showing enough ads international. Pinterest, get mean, get lean, put on some underarmor already. Put some ads in there. Put some ads in there. Peloton is reportedly launching lower cost fitness equipment. We're talking rowing machine and cheaper treadmill. It's pulling a Tesla vacation. Now, Snackers, time for our snack fact of the day.

This one's sent in by Kevin from Houston, who is a fan of the fine art. Arts. Congrats on, wait, did the Astros win? No. Condolences on the Astros not winning again. But Kevin was more focused on Mr. Pablo Picasso, whose birthday was just a couple weeks ago in October 25th. He was born in 1881, though.

Not Kevin. Picasso, just to clarify. So Picasso made 50,000 pieces of artwork in his life. And he lived for enough years to be 33,403 days. So 50,000 pieces of artwork in 33,000 days, that means about one and a half. pieces of artwork every day of his life. And guess what? He wasn't starting to make art until he was like, he wasn't making art when he was six years old. No. So it's probably more like

1.7. It also means that if you know someone who has Picasso, it's not that impressive. Yeah, your uncle, uh, your obnoxious uncle who keeps bragging about his Picasso. We get it. There's 49,000 others. Odds are, they're like a dozen snackers with Picasso's out there. If you're one of them, we would like to see it. Yeah, please. Tweet us a pick. Or Insta. At Robin Hood Snacks. We'll take it. Snackers. Hope you had a great weekend. Next week is Thanksgiving week. We're thankful you listen to our pod.

We'll talk to you tomorrow. Cannot wait. This is Jack. Nick and I both own stock of Tesla. Definitely a T-Boy today. 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 or 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.