Podcast Summary
Kroger's Mealtime Inspiration vs. The Magnificent Seven's Premium Valuations: Kroger offers affordable meal options with 30,000 choices, while The Magnificent Seven, despite premium valuations, are worth owning for their strong fundamentals.
Kroger offers an extensive selection of over 30,000 delicious options for mealtime inspiration, along with everyday low prices and various savings opportunities. Meanwhile, the Magnificent Seven companies, which include Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla, had impressive gains in 2023, but their high forward earnings multiples suggest they may be expensive and could face selling pressure as the bull market broadens. These businesses, despite their premium valuations, are still worth owning for their strong fundamentals. Apple, for instance, despite being the laggard of the seven with "modest" 49% gains in 2023, still has a forward earnings multiple of 35 for the group. It's important to remember that owning these stocks is different from buying them, and while the timing for adding to positions might not be ideal, these companies remain solid investments.
Challenges for Magnificent Seven Tech Companies in 2024: Despite a strong 2023, the Magnificent Seven tech companies face potential iPhone sales declines, revenue drops for major assemblers, and price-focused shoppers in 2024, presenting opportunities for investors.
While the Magnificent Seven tech companies had a strong year in 2023, there are signs of challenges ahead, particularly in the hardware sector. Apple, for instance, is facing potential declines in iPhone sales due to longer-lasting devices and potential decreases in upgrade frequency. Foxconn, a major iPhone assembler, reported revenue drops and declining sales for the first quarter of 2024. However, these potential setbacks may present opportunities for investors, as these companies remain best-in-class businesses with pricing power and non-cyclical, recurring revenue. The holiday shopping season saw modest growth in online spending but significant discounts, with electronics seeing a 31% peak discount compared to 25% the previous year. These trends suggest that shoppers are focusing on price and may not be paying more for goods, which could impact the revenue of these tech companies. Overall, while the Magnificent Seven had a strong year, there are potential challenges ahead, and investors should keep a close eye on these developments.
Buy now, pay later services see surge in holiday spending: Consumers used $16.6B in buy now, pay later services during the holidays, leading to concerns over potential debt accumulation. Retail sales grew both online and offline, with ecommerce driving heavier growth.
The use of buy now, pay later services is on the rise, with $16.6 billion spent online during the holiday season, up 14% from the previous year. This trend is causing concern for sellers and financial institutions, as consumers are increasingly using these services in addition to credit cards, leading to potential debt accumulation. Meanwhile, retail sales saw growth both online and in brick and mortar stores, with ecommerce driving the heavier growth at 3%. The streaming industry is also experiencing changes, with customers becoming more promiscuous and subscribing to multiple services, leading to potential consolidation in the market. In the financial landscape, it's important for credit ratings agencies and merchants to understand the consumer's financial situation and the role of buy now, pay later services. Communication skills are crucial in business and life, and the Think Fast, Talk Smart podcast offers valuable insights and tips from experts on effective communication.
Trend towards bundled streaming services: Consumers pay more for wider range of content in bundled streaming services, ad-supported options also available
We're seeing a trend towards bundled streaming services, with companies like Netflix, Hulu, Amazon, and Max teaming up to offer more comprehensive packages. This is similar to the bundle model of traditional cable TV. Consumers are willing to pay more for these bundles as they offer a wider range of content. Ad-supported options are also becoming more common, allowing subscribers to downgrade their subscriptions temporarily instead of canceling them completely. In the business world, we've seen Walgreens make headlines by slashing its dividend for the first time in 45 years. Historically, dividend cuts have not been a good sign for stock performance. As we move into earnings season, keep an eye out for more companies reporting their financial results and any potential changes to their dividend policies.
Cloudflare and Vail Resorts: Two Companies Signaling Business and Consumer Spending Trends: Cloudflare recovered from subpar Q1 earnings due to enterprise spending cuts, while Vail Resorts faces a critical quarter due to tough ski season conditions and investments, indicating potential economic downturn trends.
Cloudflare and Vail Resorts, two companies with significant earnings reports coming up, have faced different challenges but are important indicators for the state of business and consumer spending. In April 2023, Cloudflare reported Q1 earnings with subpar results due to enterprise customers cutting back on spending. However, the business has since recovered, with impressive key performance indicators and continued growth expectations. On the other hand, Vail Resorts, reporting later in March, faces a critical quarter due to tough ski season conditions and significant investments. A weak ski season and ancillary business performance could signal consumer spending weakness and potential economic downturn. As a shareholder and skier, Matt is closely watching Vail Resorts for these reasons.
Understanding the difference between investing and trading: New investors: focus on long-term investing, hold stocks. Seasoned investors: stay the course, align stocks with values, periodically review portfolio.
For new investors, it's essential to understand the difference between investing and trading. Investing is a long-term strategy, and the mentality should be to hold onto stocks for an extended period. Trading, on the other hand, is a short-term strategy practiced by professionals and those who follow minute-to-minute market trends. For seasoned investors, it's crucial to stay the course and not let market gyrations discourage them. It's also essential to ensure that the stocks in your portfolio align with your values and represent companies you would be proud to see succeed in the future. Finally, reviewing and adjusting your portfolio periodically to ensure it still reflects your vision for the future is a good practice.
Long-term success in stock investing: The NVIDIA story: Patience and a long-term perspective are crucial in stock investing. NVIDIA's journey from a $1.64 stock in 2005 to over $300 in 2021 showcases the potential rewards of holding onto stocks through market ups and downs.
Investing in stocks requires patience and a long-term perspective. The speaker used NVIDIA as an example, sharing its story from a $1.64 stock in 2005 to over $300 in 2021, with several ups and downs along the way. The investor first picked NVIDIA in 2005 due to its success in graphics processing units. By 2007, it had already seen a 6-bag gain, but the market began to peak around that time. Despite the stock dropping below the initial investment by 2008, the investor held on, and by 2014, it had more than doubled again. In 2016, NVIDIA reached its previous high, and the investor recommended it as a new pick in 2017, which turned out to be another successful investment. However, the stock dropped significantly in 2018 due to the crypto market downturn and AI hype slowing down. By 2020, it had recovered and surpassed its previous high, and in 2021, it reached over $300 per share. Despite the stock's subsequent drop to around $100 in 2022, the investor emphasized the importance of staying invested for the long term and learning from the successes and failures of stocks like NVIDIA.
Long-term investing and holding onto great companies: Stay focused on long-term vision, not swayed by short-term trends, and hold onto great companies for years to reap significant returns
Investing for the long term and holding onto great companies can lead to significant returns. The example of NVIDIA, which lost two-thirds of its value in a single year but has since rebounded and provided massive returns for those who held onto it for over 18 years, illustrates this point. It's important to have a long-term vision for your portfolio and stay focused on it, rather than getting swayed by short-term market trends or pundits. Additionally, not all great companies provide instant gratification, and selling too early can result in missing out on potential long-term gains. Other companies like Netflix, Apple, and Amazon have also provided substantial returns for those who held onto them for years. The key is to stay focused on your long-term vision and not get distracted by short-term market fluctuations or popular labels like the "Magnificent Seven." Instead, the real measure of success is the number of years you've held onto these great companies, which is a more meaningful indicator of your investing success than the stocks you currently hold or the labels used to describe them.
Finding inspiration and wisdom through quotes: Life's beauty grows with time, and companies like UiPath capitalize on AI trends for business growth.
Finding inspiration and wisdom through quotes, regardless of their origin or time period, can help us navigate life's ups and downs, including our personal and professional journeys. Frank Lloyd Wright's quote, "The longer I live, the more beautiful life becomes," is a reminder that even though life may not always be easy or beautiful, the passage of time can bring growth and appreciation. In the business world, companies like UiPath, which specializes in automation and computer vision technology, are capitalizing on the trend towards AI and machine learning, offering solutions for various industries and expanding their reach through partnerships with other tech companies. As investors, it's essential to stay informed about these trends and the companies driving them.
Discovering hidden gems in the stock market: Look beyond a company's name or past performance to uncover promising investment opportunities, like Pebblebrook Hotel Trust and UiPath
There are hidden gems in the stock market that may have been overlooked due to their past performance or unassuming names. For instance, Pebblebrook Hotel Trust (PEB), a REIT that has suffered in the past few years, including during the pandemic, is now showing signs of recovery. The company has sold off non-core assets, paid down debt, and has a strong management team that has been buying back shares. Despite its past struggles, Pebblebrook Hotel Trust could be a promising investment opportunity with a potential big dividend raise this year. Another example is UiPath, a company with an unassuming name that is actually a leading player in the artificial intelligence industry. Though it is still working towards profitability, it is a risk worth considering for those interested in the AI sector. These examples highlight the importance of looking beyond a company's name or past performance to fully understand its potential value.
