Podcast Summary
CrowdStrike outage impact: The CrowdStrike outage caused significant losses and disruptions to various industries, leading to calls for increased regulation of tech companies
The recent global IT outage caused by CrowdStrike's updates had a significant impact on various industries, particularly banking and airlines, resulting in estimated losses of up to $5 billion for Fortune 500 companies. The widespread disruption led to numerous travel disruptions and business interruptions. The response from CrowdStrike and its CEO, George Kurtz, has been criticized, and the incident has raised questions about whether tech companies could become "too big to fail" and face increased regulation. Matt Agersinger, who experienced the travel chaos firsthand, gave a unsatisfactory grade for the response, while shares of CrowdStrike have taken a hit, down about 30% as of recording.
Tech Companies' Influence: The size and influence of tech companies like Microsoft, Alphabet, and Amazon are significant, with potential consequences for people's lives and the economy. Clear communication is crucial in managing incidents, and companies like Chipotle and Tesla continue to shape their industries.
The impact of large tech companies on people's lives and the economy as a whole is significant and raises questions about their size and influence. Microsoft, despite not being directly responsible for the recent cybersecurity incident, felt the effects with 9 million devices affected. The discussion also touched upon the idea that these companies, such as Microsoft, Alphabet, and Amazon, have become so large that their disappearance could potentially halt the world's progress. The conversation also addressed the $10 gift card situation with CrowdStrike, highlighting the importance of clear communication in such situations. In the business world, companies like Chipotle continue to thrive, with impressive revenue growth and comparable store sales. Tesla, on the other hand, reported a decline in net income due to waning demand in the EV space. Despite this short-term setback, the long-term potential of the electrification of transportation and the increasing demand for energy remain promising.
Pricing power and innovation: Chipotle and Spotify are demonstrating pricing power and innovation, leading to financial success through effective price increases, user growth, and expanding offerings
Chipotle and Spotify are two companies currently demonstrating pricing power and innovation, leading to strong financial performance. Chipotle, a bellwether for consumer trends, has seen success with quality products and effective price increases. Meanwhile, Spotify, now a significant player in the entertainment industry, has benefited from user growth and price hikes, leading to increased revenue and profitability. Despite some recent misses in user growth, Spotify's focus on developing markets and expanding offerings like books, podcasts, and music positions them for continued growth. UPS, on the other hand, is facing challenges in balancing cost-cutting efforts with declining package volumes and the departure of their CFO. However, the potential for cost savings, a low stock price, and a high dividend yield make UPS an intriguing turnaround opportunity.
UPS improvement outlook, NVIDIA long-term growth: Focus on company improvements and long-term growth potential, UPS investors should evaluate end of year, NVIDIA recommended for 3+ year hold due to history and innovation in AI space
While the macro environment plays a role in investing, the focus should be on what companies, such as UPS, can control and improve within their own operations. Regarding UPS specifically, investors will have a clearer understanding by the end of the year whether the company has made the necessary improvements to be worth owning. As for NVIDIA, David Gardner, co-founder of The Motley Fool, strongly recommends holding the stock for at least 3 years due to its history of significant growth and potential for continued innovation in the artificial intelligence space. Despite its past volatility, NVIDIA remains a top pick for long-term investors. Gardner also emphasized the importance of holding stocks for the long term and the role The Motley Fool plays in providing stock recommendations for its members. Additionally, Gardner shared that past experiences, such as the long-term success of NVIDIA, have shaped his investing approach and reinforced the value of patience and a long-term perspective.
Investing in industry leaders: Focus on established industry leaders for successful investing, as they have intellectual capital, visionary founders, and financial backing, making them the most promising investments in any industry
Successful investing involves focusing on innovative, industry-leading companies rather than trying to discover unproven, niche businesses. This was a lesson the speaker learned early in his career, when he shifted his approach from seeking undiscovered small cap companies to identifying and investing in established industry leaders like America Online. He emphasized that every industry has innovators, and by identifying and investing in these companies, an investor is fishing in the most stocked pond. The speaker also mentioned the importance of intellectual capital, visionary founders, and financial backing as factors to consider when identifying potential investments in the rapidly developing field of AI. He encouraged looking for individuals who are passionate about their industry and willing to challenge the status quo, as well as those with strong financial backing.
Customer Preferences: Companies need to adapt to changing customer preferences to remain competitive. Southwest Airlines introduces assigned seats to better serve 80% of customers, while Coupang continues to expand in South Korea despite population challenges.
Companies need to adapt to changing consumer preferences to remain competitive. Southwest Airlines, for instance, is ending its open seating approach and introducing assigned seats based on customer feedback. The move may address concerns raised by activist investor Elliott Management, but it's primarily a response to the 80% of customers who preferred assigned seats. Similarly, Matt Hargersinger is looking at Coupang, an ecommerce company in South Korea with impressive growth potential. Despite the country's population challenges, Coupang still has room to expand and has recently become profitable. In both cases, companies are making changes to better serve their customers and stay relevant in their industries.
Twilio growth and share repurchases: CEO Chip Chandler's focus on profitability and share repurchases, despite slower growth, indicates confidence in the company's future value and potential investment payoff.
Twilio, a tech company, is projecting organic revenue growth of 4-5% for the current quarter and maintaining their full year organic growth target of 5-10%. Despite this slower growth, CEO Khozema Shiptchandler, who is relatively new to the position, feels strongly that the company is undervalued and has been actively repurchasing shares to bring down the share count. Twilio is also moving towards sustainable profitability and free cash flow. Although the market may currently be less tolerant of companies like Twilio, if CEO Chip Chandler continues his efforts, the investment could potentially pay off. The whimsical name of the company, Twilio, might sway some investors, as it is fun to say. Overall, Twilio's focus on profitability and share repurchases are encouraging signs for the future.