In this episode of the Motley Fool Money podcast, Motley Fool senior analyst Bill Mann discusses:
- Why Delta Airlines is projecting financial optimism about 2023.
- Why Moderna shares popped by 20% after it reported promising results from a skin cancer treatment trial it performed in combination with a Merck drug.
- And why Tesla shareholders are getting nervous.
Also, Motley Fool producer Ricky Mulvey talks with Jack Caporal from The Ascent, a personal finance brand of The Motley Fool, about the most popular financial New Year's resolutions and tips for keeping them.
For more data on The Ascent's survey on financial resolutions, click here.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on Dec. 14, 2022.
Chris Hill: We've got encouraging news about a cancer treatment and an early look at financial New Year's resolutions. Motley Fool Money starts now. I'm Chris Hill. Joining me today, Motley Fool Senior Analyst Bill Mann. Good to see you, my friend.
Bill Mann: Hey Chris, what's happening?
Chris Hill: Stuff is happening even though we are 10 days out from Christmas Eve, stuff is still happening, and we're going to start in the airline industry with Delta coming out and saying 2023 is going to be really good for us.
Bill Mann: We back! We are back!
Chris Hill: Anyone who has tried to buy airline tickets for 2022 is probably aware that prices have gone up. Look, if you're a Delta shareholder, you're probably pretty happy. If you're trying to buy airline tickets, maybe not so much. One of the things we have talked about all year long is how there's not really any great incentive for company executives to come out and raise guidance in any significant way. Which I think -- to me, anyway -- makes it all the more remarkable that Delta basically came out and said, "We think our earnings in 2023 are going to be about double."
Bill Mann: Which is pretty good. Ed Bastian, the CEO, those were his comments. Also said that they expected revenues increasing 20%, which is how that works with any industry that has a high degree of operating leverage. Planes take off and most of the weight is the plane itself, and so most of the fuel cost is getting the plane up, and so everything else is somewhat incremental. So a 20% gain in revenues, they believe will equal nearly a doubling of [earnings]. Really good news for Delta.
Chris Hill: Really good news for Delta. I'm wondering, however, if this is going to be one of those points in time that we look back upon at some point in the future if Delta or another major airline gets into some financial trouble and is looking for a bailout. Because...
Bill Mann: Where were you when we needed you?
Chris Hill: Not that I'm wishing bankruptcy for any business. But this is one of those things where it's like, if times are good for Delta, that's great. I'm pretty sure there are some people on Capitol Hill who are going to remember this in the future.
Bill Mann: It's funny that you put it that way. We aren't really talking about the wider airline industry. What Delta is saying is that everyone is coming back at once. Vacationers are coming back, business travel is coming back. At the same exact time, United Airlines -- also an airline -- is having a pretty rough go of things. Fuel costs are much higher than they were a year ago. One of the things to keep in mind with Delta -- and they got criticized for this -- a decade ago, they bought a refinery. So Delta has an internal hedge for fuel costs based upon a refinery that they get to use for their own purposes. I'm not sure what Congress would say. It is true, if I bought another Delta ticket, probably their revenues would go up another 1%. That's how much they are. But Delta is uniquely -- at this point, given the volatility in fuel prices -- in a really good position.
Chris Hill: Let's move to the world of science. Shares of Moderna up around 20% so far this week. Moderna had a successful study of a skin cancer treatment that involved one of their vaccines in combination with a cancer drug that Merck had produced. This is one of those things that's great across the board. It's obviously great for the shareholders involved. As someone who has dealt with skin cancer, this is good news.
Bill Mann: For sure. Now, Moderna has come out and said that they have found with the study that they've just finished, that there is a 44% reduction in risk of recurrence of cancer and death rather than just using the Merck drug Keytruda. Now, it's really important -- and to their credit, Moderna got out in front of this -- there are certain components and caveats to the trials that they have done. So they are not saying in any way, this is that. What they are saying is ... basically the promise of Moderna and mRNA technology is really getting to the point of something that we've heard about for a long time, which is personalized treatment for cancer. So seeing that type of evidence is really promising to old guys like you and me, but also to medicine in general. Because cancer is a very unique disease in that it is something that if you ask an oncologist, they'll say, every heart attack has similarities, but your cancer is your own. So this is a great promise and something that the entire industry has looked to for a long time.
Chris Hill: When it comes to investing in these types of businesses, what do you think is important for people to keep in mind? Because, as you said -- and thank you for the caveats around the trial -- one of the things I noticed was, I believe, the number of people in this study was either 100 or 150. It was not a big number. It was promising results, but nothing that wouldn't warrant larger testing down the line. In terms of these types of businesses, what do you tell people?
Bill Mann: Gosh, that's a really good question now. The primary caveat around this is that the trial was somewhat small. With a phase 2 trial, they don't actually have to hit statistical significance in order to be able to make certain assumptions of what they're seeing. What I would suggest is true about drug development in general is that it is massively, massively capital intensive. A lot of times, I think people think they've got to get in really, really early with super-bleeding-edge biotech companies. If you really wanted to play something like this, although Moderna has done very well, you might just want to play Merck. One of the largest companies in the world by market cap, but they're going to benefit as well. So I think that one of the primary things that people need to think about when it comes to biotech companies is that it is a really, really high-failure/low-hit investing path. There are people who can do it and who are very good at it. But I would be very cautious taking any extrapolations from headlines.
Chris Hill: Before I let you get back to your day job, I do want to get your thoughts on Tesla, because I tweeted out earlier this week that since April 14, which is when Elon Musk announced he was going to buy Twitter, shares of Tesla has been cut in half. And I know there were a lot of other factors involved in a share price dropping. It's not a direct cause-and-effect situation. But I have to imagine that Tesla shareholders would prefer that Elon Musk spend more time on his biggest company and less time on his newest company.
Bill Mann: How much do you need to lose with this before your plaything...? Right, you're talking about a $1 trillion company at its peak versus one that he probably overpaid for at $44 billion. So yes, I think that Tesla shareholders are very accustomed to dealing with the fact that they get only a percentage of the attention of Elon Musk, the CEO. He's got SpaceX, he's got The Boring Company, he had Solar City at one time. This is just how he operates. I will say, and you made this caveat as well, because I have seen a lot of people make the case, saying that his involvement in Twitter has been a direct drag on Tesla shares. It's really important for people to remember that we don't actually know what makes share prices go up and down. Making that one to one, I think, is a little bit of a mistake. I will say that it is pretty clear that the lack of attention that he seems to be paying to Tesla is making a lot more true-believer investors much more nervous than they have been in years.
Chris Hill: Bill Mann, always great talking to you. Thanks for being here.
Bill Mann: Thanks, Chris.
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Chris Hill: If you're thinking about a financial resolution in the new year, you may want to head to the App Store. Jack Caporal from The Ascent joins Ricky Mulvey to talk about the most popular financial New Year's resolutions, and some tips from those who keep them.
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Ricky Mulvey: About two-thirds of Americans have got financial resolutions for 2023. There might be a spoiler coming. Joining us now is The Ascent's Jack Caporal. Good to see you.
Jack Caporal: Hey Ricky, it's great to be back on the show.
Ricky Mulvey: Tell me what are the financial resolutions that the Americans are making? Us Americans, I'm an American too.
Jack Caporal: Well, then you might have a financial resolution. The Ascent found that the most common financial resolution for the coming year is to pay off debt. Americans, they're also focused on saving for a big financial milestone like buying a house or a car or expanding their family. They want to build their emergency savings, and they're also trying to increase their salary. Ricky, you mentioned a spoiler at the top: spoiler alert! That spoiler is that most of them are concerned about inflation getting in the way of their goals, although that may be changing.
Ricky Mulvey: Hopefully. How do those goals change by age?
Jack Caporal: By age, younger generations are more concerned about saving for a big milestone than older generations. That makes sense. When you're younger, you are starting to lay the financial groundwork for what's to come: a wedding, a down payment on a house, getting ready to support a kid. On the other hand, older generations were more likely to choose a resolution that involves paying off debt, building emergency savings, and also saving for retirement. I found that to be a little surprising.
It seems more likely that young folks with less disposable income could be more likely to fall into credit card debt or have some personal debt. It was a little bit odd to me that older folks might still be focused on emergency savings and saving for retirement because those are things that, of course, we want to start doing early on. Then finally, investing more -- that's a resolution that tilts toward younger Americans. I think that's natural given that older Americans might not feel as though they have as much time to see investments deliver returns.
Ricky Mulvey: If you're older, you might have kids, you might have a house, you might have a car, so that emergency fund might be more of a priority. And 40% of people are still living paycheck to paycheck, so I wouldn't write that off. How are the younger folks trying to invest? Because research from your colleague Dan Albright basically found that the Gen Zers still like their crypto and pot stocks.
Jack Caporal: Sure. The Motley Fool found that in addition to crypto and pot stocks, Gen Z and millennials, they also lean toward investing in companies in the financial sector, energy, real estate, and tech. Younger generations also want to build larger portfolios -- 10 or more stocks are what they believe to be a strong portfolio -- and prioritize investing for the long term. We love to see that. It suggests that younger generations are leaning into Foolish investing principles, even if they don't know it. You mentioned crypto. I'm really curious to see how the results change in our next couple of crypto surveys, given everything that's happened in that space in recent months.
Ricky Mulvey: Haven't heard, can't wait to find out. Only 20% of Americans with financial resolutions say they're confident they're going to be able to keep their resolution. Is it just inflation they're worried about or what else?
Jack Caporal: The data suggests that inflation is the biggest factor. We asked folks who weren't optimistic about keeping their resolution why they felt that way. The largest concern was just that their resolution would become too expensive to keep. So obviously, that's related to inflation. There was also some concern about the ability to build the habits necessary to keep their resolution. I think that's something that can be made more difficult when keeping that resolution just becomes more expensive.
Ricky Mulvey: Survey also asked about "buy now, pay later." Just 5% of those with debt are concerned about buy now, pay later expenses. That seems a little small. Were you surprised by that answer?
Jack Caporal: Ricky, I took it as a positive sign. I think buy now, pay later is a little bit fickle. Paying on time doesn't boost your credit score, but missing payments can harm it and add late fees or interest. It's a little bit like a credit card, maybe without upside. I think there's a numbers game happening here as well. We do an annual survey on buy now, pay later. One question we ask is what your monthly buy now, pay later payment averages out to be. For most folks, it's under $100. That's definitely lower than most other types of debt -- credit card debt, personal loan debt, mortgage payment, etc. You're going to be less likely to make a full-on New Year's resolution about $100 worth of debt. I think that's good news that folks aren't relying on buy now, pay later for big purchases.
Ricky Mulvey: Yes. Still a little concerning that 40% of people in a Forbes survey said that they used buy now, pay later for purchases under $100. Curious to see what the network effects of that will be going forward. [You] also asked successful resolutioners how they stuck to their financial goals, what were the budgeting apps, tips, tricks they got?
Jack Caporal: We found that most folks do intend to use an app or some tool to help stick with their goals. The one that I personally like the most is Mint. It aggregates all of your accounts so you can see the value of all of your accounts, where your money is going, what you're spending on, all in one place, so you don't have to flip between five or six different apps. I use that, plus just a good old-fashioned spreadsheet, to track my recurring expenses. The other thing that I do that we also have recommendations for is to automate as many transactions as possible. If I have a savings goal, just take a chunk of money out of my paycheck automatically every month, put it in my savings. If I have investing goals, automate how much I want to invest every month, throw it into the market. Automation just makes reaching your goals and just managing your money so much simpler and less stressful because again, you're not dealing with every single transfer transaction.
Ricky Mulvey: You talked a lot about the money goals, but have you personally got any New Year's resolutions outside of the financial stuff, Jack?
Jack Caporal: Ricky, we're both in Denver. You're recording this from the Denver office, it looks like.
Ricky Mulvey: Allegedly.
Jack Caporal: I can confirm we are both in Denver. That probably makes both of us skiers or snowboarders, I would imagine. I've got the ski bug. I've got some New Year's resolutions related to skiing, tackling some more difficult terrain, number of days on the mountain, that type of thing. We'll see if I get there. How about you?
Ricky Mulvey: Falling less in 2023 is always a good idea. This might sound a little lame, but I moved out here about a year ago, and I haven't really been involved with my community. I'm going to try to do that a little bit more in 2023. In addition to treating social media less like a game. Being a little less reactive, I think might be good for the blood pressure. Jack Caporal from The Ascent. Always good chatting with you. Thanks for coming on Motley Fool Money.
Jack Caporal: My pleasure.
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Chris Hill: 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. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.
