In this podcast, Motley Fool analyst Jason Moser and host Ricky Mulvey discuss:
- The killing of UnitedHealthcare CEO Brian Thompson.
- What contributed to Bitcoin's rise to $100,000 per token.
- Chewy's trouble finding new customers.
Then, Motley Fool analyst Sanmeet Deo joins Ricky to check in on a mall retailer that's showing signs of a turnaround.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our beginner's guide to investing in stocks. A full transcript follows the video.
This video was recorded on Dec. 05, 2024.
Ricky Mulvey: The CEO of UnitedHealthcare was murdered outside of an investor meeting. You're listening to Motley Fool Money. I'm Ricky Mulvey joined today by Jason Moser. Jason, we are starting today with a darker and wilder story than we normally do. Brian Thompson, the CEO of UnitedHealthcare was shot and killed in Midtown Manhattan yesterday morning. We don't know much. The killer, as of this recording has not been caught by the police. We do know that he was very targeted. The New York Times reports that authorities are running ballistics tests on the bullet casings which appear to have the words delay and deny on them, possibly in reference to UnitedHealthcare denying insurance claims. This story has been a lot to take in. What's been going through your mind as you've digested it over the past day and a half?
Jason Moser: Yeah, I think, like most people, this is just it's awful. We think about this and that's the one word that I keep coming back to. This is just horrible. First and foremost, we feel for the victim and his family. It's hard to even conceive. It does seem like it has to do with a disgruntled individual who was unhappy with some result or some call that was made by the business. That's it. There's just no excuse for something like this I really do hope we ultimately see justice prevail here.
Ricky Mulvey: I've been having to pull myself off the X platform because my mind continues to go to the dark place with it. I want to just talk to normal people about this story and not just engage with comments. I'm going to make one observation, though. We talk about businesses, we focus on the businesses, so I'm going to talk about the stock. It's OK if we don't have smart commentary for it. I'm going to observe it, maybe we'll just move on. Stock market investors like certainty. Yet, the stock of UnitedHealthcare, it's down a little bit, but it is barely budged on this news on something that is a lot of uncertainty, Jason.
Jason Moser: Well, yeah, there is some uncertainty. As bad as this news is, I'm not terribly surprised that the stock hasn't done much in the sense that he was one part of a greater team. That's not to belittle what happened here. But it's a very big company. UnitedHealthcare is obviously a very large company, and there are a lot of people within that business that are helping it run. That said to me, I do feel like the one thing that I keep thinking about, you have to wonder what's going on through the minds of leadership throughout the rest of this company.
Even beyond that, just with companies everywhere, because if this becomes something that is a little bit more commonplace where we see behavior like this from people, because companies are doing things that maybe they didn't agree with or they were not happy with. that becomes a big problem. I do really, I think a lot about how the rest of leadership with UnitedHealthcare at this point is viewing this situation and exactly how they're handling it, because it seems very reasonable that most would probably be constantly looking over their shoulders at this point.
Ricky Mulvey: I would.
Jason Moser: Yeah.
Ricky Mulvey: There's a lot we don't know here, and right now, it's a little bit of a business story. It's really a human story.
Jason Moser: It is. I agree.
Ricky Mulvey: As details emerge, if this becomes a business story, we're going to talk about it more on Motley Fool Money. There's so much we don't know that we can't have a fact based conversation and provide a lot of smart commentary for it. Jason, unless you got more, that's all I got on it for now.
Jason Moser: Well, no, I think you're right. There's just so much we don't know, but we really you said it. This is a human story, we want to acknowledge that. Until we learn more, we can't really put the pieces together here. But at the end of the day, this really is just it's a human story, and it's something we all should feel.
Ricky Mulvey: Let's move on to another story. Bitcoin. It's back in the news, Jason. I know you're not a crypto guy, but this is big enough that I think it's worth talking about on the show, and it's something where I'm going to eat a little humble pie. I remember so back in 2018, I was working on a radio show for a financial planning firm in Cincinnati, and I saw this article in CNBC, and there are these analysts giving $100,000 price predictions for Bitcoin. I was like, "This is clickbait." This is like, this is so stupid. How could you possibly think this? You know what? They were right, I was wrong? There is a tremendous demand for digital gold. So far, Michael Saylor of MicroStrategy has been right. I've been a little bit wrong about this. How surprised were you to see Bitcoin hitting $100,000 for a coin?
Jason Moser: Well, if you're looking for someone to saddle up society there right there and eat some hump pie with you, I will gladly do it. Because clearly, you're right. I've never been the biggest crypto guy in the world. To me, I've said many times early days, it just felt like an easy way to get burned. Clearly, I was wrong in the case of Bitcoin, at least. Also, I got to stress, I am OK with that. I never participated, and I likely never will, because it's a greater leap of faith than I ever care to take. I just still don't fully understand why it exists, I guess, for lack of a better phrase, but with that said, congratulations to those who have done well with it. that's investing.
We leave great ideas on the table all the time for whatever reason. Either you don't get it, you don't want to take that level of risk, or you just straight up disagree with the thesis, whatever it may be, it's like that Warren Buffett, it's a no called strikes game. You don't have to swing at every pitch. I think that's important for investors to remember. We miss things all the time. Got a lot of money. You only have so much money to spread around to so many ideas. In this case, it seems like to this point, at least Bitcoin has worked out very well for a lot of folks.
Ricky Mulvey: This is also a time where I'm reminding myself where I feel my lizard brain going where it's like, "Oh, everybody's in on crypto. Is this something I should get excited about?" While it hasn't really been a big part of my investing style, what I'm reminded of is, no, the time to get excited about it is when everyone's down and out on it. When you see the certified financial planners dunking on crypto, when the CEOs of crypto are trying to convince everybody to get back in, that would have been the time to get excited about it. Now that everyone's at the party, you might buying high and selling low. I don't know. Let's talk about the rise, though.
Politics are a definite part of this story. The incoming Trump administration has discussed adding crypto to the nation's reserve fund. If you've listened to Marc Andreessen, who was recently on the Joe Rogan Experience, he's talked about the optimism from a lot of crypto entrepreneurs that doing business in this space is going to be easier because a lot of them over the past few years have been debunked. You've also seen over the past few years more adoption in terms of ETFs. People can buy Bitcoin through an exchange traded fund. When you're looking at this recent rise, this tremendous spike, anything else to explain it or anything else you're noticing?
Jason Moser: Well, I think there are a couple of things. certainly in regard to the ease or it's becoming easier to transact or at least to deal with buying and selling Bitcoin, that has absolutely gotten better through the years. We're seeing more platforms facilitating that process, and so I think that alone probably brings more people into the fold, and I think that's one thing that really does add to the value of Bitcoin and crypto at large. It's just you have more people that are willing to participate. That's likely a very good thing. Now, I do agree the political angle here. you got the former commissioner of the SEC, Paul Atkins. he's going to be the chair of the SEC with his incoming administration.
I think that's generally seen as pro crypto, pro Bitcoin and whatnot. If we see some more certainty, some more regulation, at least understanding more the rules within this particular game, so to speak, then it becomes a little bit more understandable for investors. I think we've talked about through the years. It's just the big debate through the years with Bitcoin and crypto in general is just what purpose does it ultimately serve. Is it a store of value? Is it a medium of exchange? It certainly seems more the former than the latter today. Then I think we can point to Jay Powell's recent comments there as well. He just recently was saying that Bitcoin, it's not a challenge for traditional currencies like the US dollar. He's pushing back on, "Listen, this isn't really a medium of exchange, but that it is a competitor to gold. It's like digital gold." It does seem like it served better at least as a store of value to this point. It's obviously more volatile, but with that said, the price is the price. For folks who have put their money at Bitcoin through the years, they've clearly seen a very unacceptable return to that investment.
Ricky Mulvey: Yeah, take a coin market cap with a grain of salt. Bitcoin is now worth two trillion dollars. You mentioned the payments platform and you mentioned the store of value. I think it's pretty agreed upon that Bitcoin is pretty bad is a payments platform. It doesn't really compare to the Visa network where the Bitcoin blocks take minutes to transact. You don't want to sit at the counter for 10 minutes to see if your payment goes through. It's believers like that its supply is limited. Is that store of value is a hedge against inflation.
I'm going to try to bring this over more into your world, Jason, into the stock investing universe. I want to see if there's any not commonalities, but let's take some of these concepts. Store value maybe a controlled share count. Companies that are offering a really disciplined, controlled share count and something where you expect its goods and services to provide value for decades. Are there any companies that you think about when you think of that store value, share count discipline, long lasting service or goods?
Jason Moser: Yeah, I think there are a number of ways to look at it and I think the broadest way you can look at it. If you're looking to hedge against inflation, you can never really go wrong with just investing in the broader S&P. The S&P, it's very tech heavy nature. I think, generally speaking, businesses that gain from inflation, that do well in inflation, are businesses that don't require a ton of capital. You see the S&P obviously is very highly concentrated with technology, business communications companies. I think that accounts for close to a third of the index today as it stands. But that makes sense to me if you're looking to take a lower risk way to hedge, so to speak. I think another way you can look, and this is an interesting I know Matty Yarger single would love this. You can look to REITs, Real Estate Investment Trust. I think real estate generally does a pretty good job of keeping up with inflation.
We look at Prologis. That's one that we like a lot here at the Motley Fools. It's been recommended in a number of our services, what I own personally, company that's very focused on investing in warehouse side of real estate, as well as the burgeoning data center side, and you get that really hefty dividend every quarter as well, which is nice. Then I think look to companies that you feel like have some pricing power or they're maybe less exposed to discretionary spending. Think about things people need. They're not optional. One that stands out to me, there is insurance. Insurance is always an interesting one to me. You don't really have the option there. You got to pay for that insurance, whether it's your car insurance, whether it's your business insurance, whatever it may be. Companies like Markel, I think, and Kinsale Capital in the specialty space. Then the one that stands out there, we probably see the commercials all the time, progressive insurance. You got to pay that car insurance, Ricky.
Ricky Mulvey: Yes, I understand that I have to pay that car insurance. I know exactly how to do that.
Jason Moser: It's worth noting all three of those companies have outperformed the market over the last three years in what I think we all would consider to be a very high inflationary time.
Ricky Mulvey: Well, I'm happy to be an owner of Prologis. I'm happy to be an owner of Kinsale. Let's move on to a company that reported, I'm a little less happy to be an owner of. That's Chewy. The pet retailer reported yesterday it's boosting its earnings. Its sales are up a little bit, but here's what I can't get over. This business, Jason, is not adding any new customers. I think that was forgivable when a bunch of people adopted pets over the pandemic, then interest waned. But now, we're about five years from 2020. How are you not adding more customers? I own shares, and my thesis was that Chewy customers love the business. There's so much customer love for Chewy, and more folks would be coming in after that pandemic hangover. You're the patient long term investor. I'm trying to be a patient long term investor. Should I be patient here?
Jason Moser: Well, I feel like you probably should be. I don't personally own shares of Chewy. My daughters do own shares of Chewy. With a household here of three dogs and a cat, Chewy gets a lot of our money every month, every two weeks, really. But you're right. I think on the one hand, it is a concern, that customer growth has stalled. Now, let's be fair and admit that they pulled a lot of customer growth forward over the last few years. That accelerated a little bit abnormally, so hopefully, what we will see here and what management is guiding toward, at least, is that they should see modest customer growth year over year by the end of this year, that's at least encouraging. But you're right, if you can't find ways to expand your customer base, then you're going to have to find ways to get those customers that you do have to spend more so you'll look at those sales per active customer. Now, in regard to the business itself and profitability, they are investing in the business.
They're continuing to build out a distribution, for example. That takes time, and it costs a lot of money, and they're also expanding into new countries. That international expansion, building out the Canada presence there. I think, bottom line, for me, it's still a very young business, and it's one that I think is going to require a lot of time and a lot of capital to fully build out the distribution network. But I like the core, the market that they serve. They do one thing and they do it really well. I think something that stands out to mean quarter after quarter, we look at those autoship numbers.
Jason Moser: We use that Autoship here, and it's terrific Autoship customer sales were up 8.7% year over year to $2.3 billion. That's 80% of net sales. So it's a good business. They're doing well. But it's a young business, and they're still investing in trying to become a mature and more established business.
Ricky Mulvey: I'll tell you the story that I'm reminding myself of as I look at this, and that's when Netflix lost subscribers a couple of years ago. A lot of folks were willing to hit the panic button. But when you have smart leadership teams, when you have a product that customers love, sometimes they can figure it out. You mentioned that they do one thing really well. Chewy is also trying something new. They've launched vet care clinics. It's got six clinics open, and CEO Sumit Singh is hoping this will unlock a $25 billion total addressable market. You're seeing big tech companies get into the healthcare space before. It's been a little tricky. What do you think of that move?
Jason Moser: Well, I think it's a sensible move. Going back to that they do, one thing very well, and I'm using pets. That's the one they do really well. We probably shop at Chewy mostly for pet food and maybe pet medicines. I think getting into the vet side of the business makes sense, at least to attempt. That said, it's also a very competitive space. They have a lot of strong competition out there. You look at a company like Mars. Mars owns Spanfield. They acquired VCA a while back, and so it is a difficult space, no question. But the flip side of that they talked about this in the call net sales per active customer actually grew 4.2% from a year ago, and they credited the healthcare and specialty businesses as driving this increase. I think it makes sense for them to give this a shot because if they pull it off, it absolutely could take this business to the next level.
Ricky Mulvey: Jason Moser, appreciate you being here. Thank you for your time and your insight.
Jason Moser: Thank you.
Ricky Mulvey: Up next, we're gonna look back on Black Friday and Cyber Monday with Motley Fool senior analyst Sanmeet Deo. He joined me for a look at two retailers, one with its foot firmly on the gas, and one turnaround story showing some green shoots. Holiday shopping season is well underway in Sanmeet, a couple of days ago, I checked in on Black Friday results in Cyber Monday with Bill Mann. Basically, the headline is that Shopify is proving to be a winner where their sales are up about a quarter from last year, and also that shift from in person store experience to online buying is continuing. Now, when I did that segment, I found a new wrinkle, and that was because of something that you sent me is we looked at the overall in store shopper traffic from a company called Sensor Matic Solutions. They found that that was down foot traffic down about 8% compared to 2023.
Then in from the top rope comes Simon Property Group, which operates a lot of class A mall space. You can think of the nice shiny floors going on at a Simon Property Group Mall. I've been to a few of them. They say that over this past holiday weekend, traffic at their malls is up 7% year over year. When you're looking at these results, what comes to your mind is a stock analyst.
Sanmeet Deo: What do we believe? Ironically, we were just talking about this all flying. It's like with macro level data, it can be so conflicting confusing sometimes. You always have to take with a little bit of grain of salt. For every bit of data that you find, like the ones that you found, you can find something contradictory. So I saw a survey by the National Retail Federation that showed around 126 million shopped in person over the Thanksgiving weekend, which was up five million from 2023. Online shoppers fell 10 million year over year.
So I would have expected online traffic to be a lot stronger than foot traffic. But in terms of the data you presented in the sensor Matic Solutions data, that is overall retail traffic across various types of stores and locations. While Simon is focused on their properties, their malls, their outlet stores and whatnot. Some of that discrepancy could indicate that mall traffic is actually performing better than some of these other types stores and locations, and specifically Simon's Properties might be performing even better than other mall. So CEO David Simon said, popular brands throughout our portfolio reported double digit sales increases over the weekend compared to last year. So I think malls are doing well, specifically Simon.
Ricky Mulvey: We're starting to hone in on some of these brands because I know you follow, especially some of these athleisure brands, people are going to this class A mall space. They want to go where it's nice and where it's popping. What brands are doing well in that class A type mall space, like your Simon Property Group places?
Sanmeet Deo: You still have, like, the luxury brands like, Louis Vuitton, Gucci, Tiffin. They're all expanding their presence in, like, top tier malls. Simon doesn't really break down their brands that are performing well, but on their shop Simon digital platform, which is relatively new companies like Adidas, American Eagle, Cool Han, Steve Man Todd, they're doing quite well. A big story, too, of late in terms of retail has been Abercrombie & Fitch. They reported com sale increase of 16% in the third quarter of this year, with growth like broadly across all geographic regions and multiple categories, a lot of strength in Hollister, which is in their teen market. I've actually anecdotally hurt a lot of, my daughter and her friends interest in Hollister.
Ricky Mulvey: People love Abercrombie & Fitch, and I'm hoping that we can have a story a little bit later that might emulate Abercrombie and Fitch, although you always want to be careful saying X is the next thing that's already done really well. One company I want to talk to you about, and this is one that's not really at malls as much, but it's a high demand Black Friday item, at least in my household, and that's On Holdings. This is a premium brand that does really nice walking and running shoes, and over Black Friday, it discounted some of its popular shoes by 30-40%. This is not an ad. We got two pairs.
We got two pairs of On shoes in my house because we're like, they don't do it that often. The very popular on Cloud 5 are still full price at 140. They have, like, a slightly different version that I ended up buying for 100. So we'll see how different they really are. I had to get them in, like, a slightly off color because a lot of the sizes and colors that I wanted were sold out. But when you look at this, like, a super premium brand like on that's made a name for itself in terms of selling things at full price. What are you watching when you're seeing them discount some of their products over the holidays?
Sanmeet Deo: I'm OK with their discounting because it's a more targeted member exclusive approach. They're doing it to clear out some old inventory. They're offering discounts to members only, so you have to sign up and become part of their member program to actually get the discounts. They're boosting some sales during, like, seasonally slow times. They want to try to expand their customer base a little bit to some of the more price sensitive customers out there, but it's not a wholesale discounting strategy, per say.
Ricky Mulvey: I've gotten two pairs of On shoes. It was actually when we first did a segment about on I started looking into it more, and then I got some shoes. I had to go like a half hour away to Dick's Sporting Goods to get the color and type that I wanted. When I talked to the guy who was working the cash register at Dick's he was saying, I'm seeing a ton of these shoes flying off the shelves right now more than pretty much any other brand. They're doing this at full price. The thing that's really driven On's growth, though, is direct to consumer sales. How has On mastered this channel when a lot of other apparel companies need their own to partner with other shoe sellers like your FootLockers and your Dick's sporting goods, a little bit more to drive that growth.
Sanmeet Deo: I've been seeing On's everywhere. I haven't shopped for them myself. I've actually been curious to potentially buy some for myself or my family, as well.
Ricky Mulvey: You've been curious about this for, like, eight months?
Sanmeet Deo: I know. I haven't pulled so many shoes, so I'm like, maybe I'll hold off, but I'll do it one day. They've distinguished themselves as a premier footwear brand. Innovation is really the core. Every time I've seen On shoes online or on people's feet, they're pretty nice looking. Some people don't love the great or whatever it's called on that sole.
Ricky Mulvey: The bridges get stuck into if you go anywhere that has any type of pebble,.
Sanmeet Deo: Not the best for those, I'm sure. But they've done a good job of strategically placing themselves with premium wholesale partners, like a Nordstroms, that align with their premium brand image. They're careful who they work with, ensuring their brand authenticity and sophistication. While they've shifted to direct consumer, they haven't completely abandoned wholesale, and wholesale is still outpacing direct to consumer. Nike, on the other hand, has undergone significant changes in wholesale strategy. Hasn't really balanced well between wholesale and DTC leaving some of their wholesale partners in the dust and going to full in on DTC. So on will have to be careful not to lean in too heavily and negatively affect their dynamics with their wholesale partners, but they're doing a good job right now balancing.
Ricky Mulvey: Because that's what Nike's now walking back from is really going away from their companies like FootLocker that we're selling their shoes. Then FootLocker then adjusts getting more brands in the door, and then Nike has to say, hey, remember the good times? We'd love to come back and get some of those premium shelf placements. Ever since we've talked about On on the show, which has been about 6, 8 months, I look at the stock and I'm like, This is a really expensive stock. Then it's kept being a really expensive stock and an even more expensive stock. When you put your stock analyst hat back on, not the person who just owns too many shoes and is not going to buy sommons, where are you at with the company?
Sanmeet Deo: I'm still bullish on the company. I personally own it myself. I think it's going to continue to, innovate, increase their brand awareness through different partnerships, different sports activities that come up, expand. It's a peril line, which it's still very early in. They're impressing me with their ability to take share from companies like Nike and Adidas. You listen to an On earnings call and when you listen to Nike, while you may not know the exact numbers, you can tell that they're biting off a little bit from those bigger guys. They have a play to win attitude, and I love it.
Ricky Mulvey: I want to go to another retailer. We'll go back to the mall for a real mall retailer that might have a comeback brewing. You mentioned Abercrombie and Fitch earlier. I don't want to say this is the next Abercrombie & Fitch, but I want to see if they have a legitimate turnaround brewing. That's over at the Gap. When we talk about the Gap, we're also talking about Old Navy, Banana Republic, and Athleta. A few things have happened. Number 1, is that they got a new CEO in Richard Dixon. This was last year, last August. He comes in from Mattel, where he had reinvented Barbie. For Mattel and give it a brand upgrade.
Obviously, the movie had later come from that. I don't know exactly what his involvement is with that, but he was at Mattel. He was working on Barbie for a good number of years. He goes into the Gap, and now he's been there for more than a year. When you look at these brands, Gap, Old Navy, Banana Republic, Athleta, and you look at the comp sales since he's been there, none of them are shooting the lights out, but three out of the four have gotten better since he's been there. A lot of that reinvigoration, I think, is due to that new CEO Richard Dixon. So what is he doing since he's come in to try and transform Gap and their brands?
Sanmeet Deo: I might be aging myself here, but when I think of mall retailer, I thought I always think the Gap as the mall retailer. That was a big draw going to the mall when I was younger. He's doing a few things. One is a big part of his strategy is reducing the product assortment. It had gotten cluttered, it had gotten complex. There was just too much. In this day and age, we just have too much sometimes. He wants to make a more focused, compelling selection of merchandise, which will improve the customer experience and also streamline the operations and the costs. Another thing he's doing is revamping the marketing strategy, making it more relevant to today's consumers, embracing digital marketing, e-commerce, engage that younger demographic who we've seen with Abercrombie and Fitch are the ones buying a lot of these clothes and are very excited. They still go to the mall and buy. One of the other things he's doing, too, is just getting back the identity of each of those brands that you listed. Gap has its own unique identity, Banana Republic, Old Navy, getting back to the core roots of what those brands were and each having a reason for people to want to go to those actual brands.
Ricky Mulvey: When we talk about retail, this is an incredibly difficult business. Small retail is really, really tough. Gap also it's been historically a cyclical stock. When you look at this turnaround story that's maybe starting to brew, do you think it's deserving this company of a spot on retail investors radars?
Sanmeet Deo: I think it actually is. Writing a retail turnaround story can be difficult. Consumer perceptions of a brand can change quickly, especially in this day of social media. Luckily, the Gap is not trading at a price that's almost at, like, a bankruptcy valuation. It's trading at about 12-13 times forward earnings, not terribly low, but not, premium price or even, like, richly valued. But I think it's worth keeping an eye on because, as I look at more like social media trends, TikTok comments, and chatters of customers, being surprised and delighted by Gap.
People are even telling you, hey, you should check out the Gap. It's gotten a lot better. Don't fall asleep on the gap. If this continues and there's more social media chatter, people are going, it results in sales and like that cool factor, it could be something that Rose, I'd like to see it be more consistently sustainable and profitable with that and could expand internationally, which Abercrombie has done, can establish a significant digital presence. Are there threats like fast fashion that they are still fighting off? So still a lot there, but it's definitely worth keeping on the radar.
Ricky Mulvey: I think my big question is I've put this stock onto my watch list. I don't own it currently at the time of this recording is what can Dixon do about Old Navy? Because that is a massive channel for the Gap, and I think that's one that's going to be pretty tough to turn Sanmeet Deo, I appreciate you being here. Thank you for your time and your insight.
Sanmeet Deo: Thank you, Ricky.
Ricky Mulvey: 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 Sal buyer sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. Motley Fool only picks products that I personally recommend to friends like you. I'm Ricky Mulvey, thanks for listening. We'll be back tomorrow.
