In this podcast, Motley Fool senior analysts Jason Moser and Matt Argersinger discuss:
- Industries and trends that investors should be watching.
- Why the CEOs of Amazon, Starbucks, and Twilio could be on the hot seat.
- Two stocks poised for upside.
- Keeping online streaming and “buy now, pay later” businesses on a short leash.
- Why they aren’t worried about Blackstone, Home Depot, or Johnson & Johnson.
- Potential surprises for investors in 2023.
- Why Live Nation and nCino could both be acquired.
- One trend and one stock that investors will have to be very patient with.
- Reckless business predictions involving crypto, Elon Musk, and Warren Buffett.
- Two stocks on their radar: Topgolf Callaway and Easterly Government Properties.
Want even more stock ideas? Get a free copy of The Motley Fool’s “5 Stocks Under $49” report by going to www.fool.com/report.
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.
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This video was recorded on Dec. 30, 2022.
Chris Hill: It’s a brand new year for investors, Motley Fool Money starts now.
From Fool Global headquarters, this is Motley Fool Money. It’s the Motley Fool Money radio show. I’m Chris Hill joining me in studio Motley Fool senior analysts Jason Moser and Matt Argersinger. Good to see you as always, gentlemen.
Jason Moser: Yeah.
Matt Argersinger: Hi, Chris.
Chris Hill: It is our 2023 preview. We’ve got stocks to watch, stocks to avoid, CEOs on the hot seat, and of course, as we do every year, we’re going to make a few reckless predictions. But Matt, let’s go wide to start with: What is an industry that investors should be watching in the new year?
Matt Argersinger: I’m going to be a bit of a Homer on this one, Chris, because you know I like real estate, but I think REITs — real estate investment trusts — in general are one area of the market investors really need to pay attention to. They’re trading at huge discounts to their net asset values as a whole. REITs tend to do quite well during inflationary times, in periods of higher interest rates. That might not seem apparent right now because a lot of them are really beaten down, and that’s really the point. I’m seeing some of the best valuations in years.
You can find a slew of very strong REITs paying 5%-plus dividends, and maybe that doesn’t sound very good in a time when risk-free Treasuries are trading at 4% yields, and you can get those and not have to worry about any risk. But with REITs, you also get growth. You get earnings power, you get assets. These are companies that are growing their net operating income, growing their dividends over time, and I think if you look back to late 2022, early 2023, I think this is going to be a great time to pick up REITs and build a sustainable, growing income stream for your portfolio.
Chris Hill: After the stock market we just went through over the past year, 5% growth sounds phenomenal to me. Jason, what about you? What’s an industry you think folks should be watching?
Jason Moser: I think it’s going to be very interesting to see how the retail and consumer discretionary market shakes out here. I mean, I think we’ve got a year coming up here where rates should remain materially higher, the prospects for any additional stimulus are pretty much off the table now. We’ve seen the downside of that, and the consumer is just finding themselves in a bit of a tougher spot now. I’ve talked about this data before, but I mean, the personal savings rate’s now at just 2.3%, and you’ve got to go all the way back to July, I think, of 2005, when it was lower. Credit card balances set to cross over $1 trillion for the first time ever, and more Americans now than ever before are living paycheck to paycheck — 60% today versus 56% a year ago. I think this is just going to force consumers to be a bit more thoughtful about how they spend their money, and I think it’s going to create some winners and losers in the consumer discretionary and greater retail space.
Chris Hill: Well, and the thing about retailers, we’re going to get the not the full report card, but we’re going to get some early indications, late January, early February, as some of the major retailers start to share how they did over the holidays.
Jason Moser: Yeah, and it does feel like while consumers are spending, they’re starting to get tapped out. So I think we’re going to probably see some modest numbers for this holiday season, not too good, not too bad, a Goldilocks thing. But yeah, going for 2023, at least in the front half, it feels like consumers are going to be in recovery mode.
Chris Hill: Let’s move on to trends. Matt, what’s a trend that you’re excited about this year?
Matt Argersinger: I think this is one — and of course, I guess we can talk about the pandemic as well — but the idea of reshoring, on-shoring, bringing a lot of manufacturing back to the U.S. There is a real thing of moving from what was the just-in-time manufacturing of recent decades to just-in-case manufacturing, and we got to a situation post-pandemic where we were dealing with all these supply chain pressures, inventory problems, logistical issues. I think there’s a greater sense among companies in the United States that manufacture, that we need to bring some of that back home.
We need to bring some of that back to the U.S. There was a recent survey by Thomas Company that surveyed 709 manufacturers, and 83% of them said they were either likely or very likely to bring some of their manufacturing back to the U.S. I think that’s a big trend. The Taiwan Semiconductor plant that they’re building out in north Phoenix, the major investments we’re making there. Now that’s a foreign company, but that’s I think, a good poster child for what this trend could be like in the years to come. If even just 5% or 10% of the manufacturing that was outsourced in the previous decade comes back, you’re talking massive job growth, massive investment in the country.
Chris Hill: Well, and it was the pandemic and it was also, early in 2022, with Russia’s invasion of Ukraine. As you indicated, there are a lot of companies that we’re figuring out where they were getting all their different parts from.
Matt Argersinger: That’s right, and that’s another big catalyst I think.
Chris Hill: What about you, Jason, a trend you’re excited about?
Jason Moser: Yeah, keeping my eye on connected TV, the CTV, we talk a lot about here. The advertising that comes with it. For example, I mean, this is a company that really benefits from this, is The Trade Desk. You’ve got to search through their Analyst Day transcript from October, and just the term “CTV” was mentioned 89 times. It’s just a big driver for their business, and it’s accelerating. You see most of the big traditional media companies noted back at the beginning of 2020 that they felt like they had time — there’s going to be a 7-year process and seeing us flipping away from the cable model and more toward connected TV. They were preparing their investments accordingly. But what we’re seeing now is this has really accelerated more quickly than they even estimated, and ultimately, they view this as something that they have less than three years, really, to make this transition fully to adopting that connected TV strategy.
When you look at the past versus the future — I mean, before you had Roku, Hulu, and YouTube, which made up 46% of the U.S. connected TV ad market in 2020. Now that’s down to about 33%, and it’s not because they’re losing business, because of poor performance. It’s because we have more players in the space now than ever before. I mean, you’ve got Peacock, Paramount Plus, Netflix diving in, Disney+, Amazon among others. You see this over-the-top ad spend market. It’s poised to grow from $6.3 billion this year to just over $11 billion by 2024. A lot of money being spent in this connected TV market, for sure, and I think that’s one that investors ought to keep an eye on.
Chris Hill: You look at the early data that we’ve gotten out of Netflix and their initial foray into the ad tier. It’s starting off slowly, but maybe that gives them something to build on.
Jason Moser: I think so, and I mean, honestly, I’m not surprised at all by that. They really put this thing out there very quickly. We always refer to Reed Hastings as the smartest guy in the room when it comes to streaming. But this is a reactive move for them to incorporate an advertising tier. Maybe he’s not the smartest guy in the room when it comes to actually building an ad-supported platform. But he’s still a really smart guy. I think that you give them a little time, they’ll roll this out. It will be very effective and a nice contributor to their business.
Chris Hill: Every year, we see CEOs leave, either of their own accord or they’re pushed out. When you think about 2023, Matt? Who is a CEO whose seat is getting warmer?
Matt Argersinger: Definitely getting warmer, not hot, but getting warmer: Andy Jassy, CEO of Amazon. This is a little unfair — guy has only been in the seat for about 18 months. But if you think about some of the great leadership handoffs in history — and I’m talking, you’re going from a legendary, iconic CEO, maybe a founder, giving the ring to someone else, it generally doesn’t go well. I’m thinking back to Jack Welch to Jeff Immelt, Bill Gates to Steve Ballmer, Howard Schultz to literally anyone at Starbucks, and — unfair, but most recently — Bob Iger to Bob Chapek. But I think the only one in recent history that’s worked out in my mind is Steve Jobs to Tim Cook, which I think everyone agrees.
Jason Moser: With pushback. And Craig Jelinek has been quite an effective CEO for Costco, taking over for [James] Sinegal. That was a little while back though.
Matt Argersinger: That’s a good one too. Anyway, it is hard to find good examples. I think that automatically puts pressure on Jassy, but remember, he’s coming from AWS and he did a spectacular job there. But now he’s trying to rightsize this massive retail operation at Amazon. I just think, how much of a leash are shareholders going to give them? The stock’s down quite a bit since he took over, kudos to Jeff Bezos for getting out near the top, just like Bob Iger did a couple of years ago. But I think it’s a big challenge for him and it may not go as easy as people think.
Chris Hill: What about you, Jason?
Jason Moser: Have you ever noticed that Jassy sounds like Bezos? Like their voice, their intonations. Like, if you just close your eyes and listen to an interview with Andy Jassy, and then listen to an interview with Jeff Bezos. Just close your eyes. You listen to them, they really sound alike.
Chris Hill: Does Jassy have the maniacal laugh too?
Jason Moser: That’s what I think he needs.
Matt Argersinger: That’s what he’s missing.
Jason Moser: That’s what he’s missing. But otherwise, it’s really interesting. Maybe that’s just because they worked so closely together for so long. But yeah, I think like Matty. I mean, I don’t know that this is necessarily a hot seat, but it is getting warmer: Jeff Lawson at Twilio. Twilio is a good business and the suite of offerings that it has, but now is the time for them to focus on making some actual money. The clock is ticking, investors are ready. The key narrative of their Investor Day in November, one thing they can do to help this cause — bring that stock-based compensation down.
That’s something that we see with a lot of these tech businesses that come to the market so quickly. You’ve got to attract a capable workforce, and stock-based compensation is a way to do that, but they have committed to bringing that down. They have committed to delivering full-year non-GAAP operating profitability starting in 2023, and that’s the next step. I think investors will view this business a little bit differently once they hit that target. But they’ve got to hit that target. It’s one thing to say it, it’s another thing to do it, and if we see signs that this isn’t going to happen, I mean, Lawson’s going to have some serious questions to answer. And he’s protected with the dual-class share structure. But that doesn’t stop those questions from coming in, that seat from getting warmer.
Chris Hill: Matty made the joke about Howard Schultz at Starbucks. But let me just suggest that I actually think that Schultz as the interim CEO is actually on the hot seat for the first three months of 2023, because Laxman Narasimhan takes over on April 1 as the CEO, and I think Schultz needs to hand him the keys to the corner office, take a bow, get off the stage, and disappear forever — and if he doesn’t do that, it’s just causing problems for the next year.
Matt Argersinger: Probably right.
Chris Hill: Up next, a few stocks with upside potential and a few stocks with, the opposite. Stay right here. You’re listening to Motley Fool Money.
Chris Hill: Welcome back to Motley Fool Money. Chris Hill here in studio with Matt Argersinger and Jason Moser. It is our 2023 preview. Matt, what is a stock or industry that you think is poised for upside in 2023?
Matt Argersinger: I mentioned Andy Jassy a little while ago. He had a warning about excess capacity in Amazon’s warehouse space back in the spring, which really cast a shadow over the warehouse real estate industry. All the REITs in that space have been down 40% to 50% since he made that proclamation. Investors read too much into that. I think we still have a dire need of more warehouse and fulfillment space, in the U.S. in particular. E-commerce is still going to take retail market share over time. More and more companies are adopting omnichannel sales approaches to their businesses, and if I’m right at all about that reshoring/onshoring trend, we’re going to need more manufacturing and warehouse space in this country. So if I look at companies like Prologis, the biggest industrial REIT, Easterly Government Properties, one I like a lot, STAG Industrial — I think those are all industrial REITs that are poised to do really well in the years to come.
Chris Hill: Jason, what about you?
Jason Moser: Well, continuing on with my excitement about connected TV, I think The Trade Desk is poised for a better yield this year. Like many stocks, it’s down around 50% this year.
Chris Hill: You’d hate to think it’s going to be a worse year.
Jason Moser: I hope not. The nice thing about Trade Desk is it’s a profitable business. It makes money. They’ve crossed that hurdle and left it in the rearview. They continue to invest in the business, but it generates cash and makes money. So it’s a little bit less of a speculative type of investment, but again, you look at the tailwinds forming in connected TV, and you look at the role that The Trade Desk plays in it. They’ll be working very closely with Disney on its offering. Calling for around $490 million or better for this final quarter of the year. That would peg them at around $1.5 billion in revenue for the full year, up from just under $1.2 billion a year ago. Smart leadership in co-founder Jeff Green. It’s a business that I own personally in my portfolio. Whenever you think of the tailwinds in connected TV, one of the first companies that comes to my mind is The Trade Desk.
Chris Hill: Matt, what is a stock or an industry either to avoid or, at a minimum, keep on a very short leash?
Matt Argersinger: So I don’t think this is pushing back on Jason’s connected TV idea, because I think the advertising interplay is different than what I’m talking about, but he said it earlier, with so many new players in the space. If you go back 10 years ago with streaming TV, I think you had Netflix and HBO, and then you had all these nascent emerging players. Well, now you’ve got Prime Video, which is huge. Jason mentioned Peacock, Paramount Plus, Disney Plus, Apple, Hulu, YouTube TV, which I think just is going to bid $2 billion to $3 billion to get the NFL Sunday Ticket, as far as we know. But I just feel like there’s so many competitors now, so many choices, only so many hours in a day for someone to really consume all this amazing content that’s being made. Meanwhile, that content is becoming more and more expensive to make — especially the live TV stuff like the sports. I just worry that the industry players themselves might be heading to a marginal profit of zero over time unless there’s consolidation, unless there’s a change, because right now, I think there’s just too many players, and I think the consumer is getting to the point where it’s like, “Wait a second. I’ve got five or six of these things. I only really watch one or two. What am I doing paying for all this stuff?”
Chris Hill: Well, in 2022 we’ve seen CEOs — you look at David Zaslav at Warner Bros. Discovery just talking about the cost of content — in some cases just saying, “No, I’m not writing these checks for everything for the rest of time.” Bob Iger has hinted as much at Disney as well. So if you think about larger companies like that, it makes it even tougher for the Paramount Pluses of the world.
Matt Argersinger: I think it’s been an amazing time as a consumer of entertainment. I just think it’s going to be a tough time for the entertainment companies themselves.
Chris Hill: Jason, what are you keeping on a short leash or avoiding altogether?
Jason Moser: Well, Chris, you know how I feel about “buy now, pay later.”
Chris Hill: Not a big fan.
Jason Moser: I’m not the biggest fan in the world. I think there are reasons to be concerned. You go back to just the middle of the year. Klarna, which is one of the bigger players in this space is the pure-play buy now, pay later platform. They raised $800 million in new funding at a $6.7 billion valuation. Now that sounds great until you recognize that the previous year, that valuation stood at $45.6 billion. That is insane to think of. When you look at the other businesses out there that are playing in this space — PayPal building its own homegrown offering and benefiting from it a little bit, but then you look at something like Block, where Block made that Afterpay acquisition, $30 billion.
The gross merchandise volume for their buy now, pay later platform was $5.4 billion this most recent quarter. That was up just 10% from a year ago. It just feels like this is a lifeline when you’re running out of options, and that’s never a good thing. There was a study conducted by researchers at the University of Washington, University of California-Irvine, and the Singapore Management University: They found that buy now, pay later services, using these services results in more bank overdraft charges, credit card charges, and credit card late fees. All of these ding the consumer.
Matt Argersinger: It’s like “buy now, default later.”
Jason Moser: Essentially, that’s what it’s starting to feel like. The scary part is that spending with buy now, pay later platforms, with these tools, it’s projected to reach $1 trillion by 2025. Man, I just don’t feel like that ends well.
Chris Hill: Let’s go to the other end of the spectrum. Matt, what is a stock that you’re just not worried about? Maybe it’s not shooting to the moon, but you’re not checking on it every week?
Matt Argersinger: It’s Blackstone for me. It’s a stock I’ve owned for a little bit now. They’ve been in the news lately for some wrong reasons. They slowed the rate at which investors could withdraw from one of their big funds — that spooked a lot of investors. You saw Blackstone’s stock drop quite a bit. This is one of the smartest, best asset managers on the planet with a great track record. This is normal course of business for them when times get a little distressed. I’m not worried at all about Blackstone. I think they’re going to be just fine.
Chris Hill: Jason, what about you?
Jason Moser: Home Depot. That’s the one that stands out to me. I used 2022 as the year to actually establish my position in Home Depot, bought it in my retirement portfolio with the intention of holding it hopefully forever. I’d like to be able to pass that one on, if possible. But if you go back to our preview show for 2022, the industry or stocks that I was excited about was home improvement, and interestingly enough, Home Depot and Lowe’s have both underperformed this year, underperformed the market. Obviously, it has been a very difficult year, but again, like I said, I used that as an opportunity to build a position in Home Depot. Home improvement space is so resilient. It’s very reliable. Housing is just going to be something that underpins our economy for the rest of our days, and Home Depot and Lowe’s stand to benefit tremendously from that through time.
Chris Hill: I’ll just add in Johnson & Johnson. It actually outperformed the S&P 500 by about 15 percentage points in 2022. They’re splitting off the consumer business in November. I’m not worried at all. Our 2023 preview is going to roll on after the break, so stay right here. You’re listening to Motley Fool Money.
Chris Hill: Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser and Matt Argersinger. It is our 2023 preview, which I’ll just point out we’re recording a few days early before the end of the year, so just do us a favor and keep that in mind in case there are any last-minute announcements from any of the companies that we talk about.
The way the market has gone in 2022, obviously, not fun for us as investors, but it does offer a nice advantage that we have as long-term investors, and that is the fact that there are a lot of great companies out there that are back at levels that they haven’t been at in years.
Our investing team actually put together a report of five companies that have all fallen below $49 a share and the report is free, you can get it just by going to fool.com/report and you just get immediate access to the report, which I will point out creatively is called “Five Stocks Under $49,” so shout out to whoever named that report. Again, just go to fool.com/report.
Jason, we’re going to start with a round of fill-in-the-blank. “In 2023, ‘Blank’ is going to surprise a lot of investors.”
Jason Moser: I think it’s Salesforce is going to surprise a lot of investors in the good way, not the bad way. Chris, let’s be “glass half full.” It sounds like a broken record, but yeah, tough year, stock is down around 50% this year. We have seen just a mass leadership exodus from this company recently. Marc Benioff lost his co-CEO, Bret Taylor, I think it was the second co-CEO in three years. Stewart Butterfield from Slack, Tablo President CEO Mark Nelson. There’s a Bloomberg report that at least a dozen in the company’s leadership ranks have announced resignations since October.
This just raises a lot of questions as to what really is going on inside the building. They’re starting to feel some heat on margins, investors demanding a little bit more on the profitability side. I think Benioff’s up to the task. I think he’s taking a lot of this very seriously. It does look like they are assessing the workforce and trying to maybe rightsize the business as well, and I think that all will ultimately work out well for shareholders. Very good business, it’s just a very tough year.
Chris Hill: Matt, it can be a company, a CEO, an industry. What do you think is going to surprise investors?
Matt Argersinger: I’m actually going big macro here, Chris. I think inflation is going to surprise a lot of investors, but the opposite way. I think by the second half of 2023, we’re actually going to be talking about deflation more than inflation. I think you see a lot of the big headline inflation numbers rolling over now, especially on the commodity side. I think rents are really slowing, housing prices we know are probably going to come down a little bit. And if we do get an economic downturn, which a lot of people are pointing to, we could be in a situation, I think, by the second half where we are in a recession and the concern is no longer inflation, it’s deflation. And who knows at that point — because I never know what they’re doing — what the Fed might be doing with interest rates or where the interest rates might be in the economy. But I think, probably at this point, because inflation has stuck around a lot longer than we think, that a lot of investors assume that that’s going to be the case, that we’re going to have years of elevated inflation. I think signs point to… it might be the opposite.
Chris Hill: Well, if it’s any solace to you, no one really knows what they’re doing over there at the Fed. There you go. Jason: “This time next year, I think I’m going to regret not owning ‘Blank.'”
Jason Moser: Probably CrowdStrike. Cybersecurity for me is just a tough one to understand fully. Threats are always changing, and I fully know that I’m not an expert in this space. As such, I probably won’t buy shares of CrowdStrike either just because it’s not a business I’m fully comfortable in understanding. Now with that said, this is clearly a business that’s making waves in the space. Enterprise clients — I think the stock is having a tough time right now because enterprise clients are being very thoughtful about their budgets and they’re not spending as much right now.
But the business itself, combined machine learning and AI, and behavioral analytics; strong leader at the helm, they’ve got the co-founder CEO George Kurtz. He has a lot of experience in the space, and I think that the nature of cybersecurity is not optional. It is a requirement in this day and age, and that is only going to become more the case as time goes on. You see CrowdStrike obviously having a difficult year, I think that ultimately changes down the road. Again though, for me to get exposure in that cyberspace, I almost feel like I would just need to buy an ETF and call it a day.
Chris Hill: But earlier in the show we were talking about connected TV and advertising. Pulling back on marketing spend, that’s a lever that a lot of businesses across a range of industries are pulling. To your point, don’t cheap out on cybersecurity. What are you just feeling?
Jason Moser: You get what you pay for in that case.
Chris Hill: Matt, what do you think people are going to regret not owning a year from now?
Matt Argersinger: Well, I think I’m going to regret probably not owning Prologis. This is me being silly with stock investing in the sense that I’ve been waiting for a lower price. This stock, I’ve been anchoring to the $100 stock price on this company. As we’re taping, it’s like $110. It’s the world’s biggest REIT, I think, at this point. it’s certainly the world’s biggest industrial REIT. For all those things I said earlier about the need for more warehouse space, rents in that space are going to be growing bonkers. It is just such a well-managed company throughout decades, it’s been a huge outperformer. For whatever reason, I tend to own the smaller REITs in that space, and so I’ve neglected Prologis, but I know for a fact, probably a year from now, I’ll regret not buying Prologis today.
Chris Hill: One thing that we see as investors in good times and certainly in recessionary times is larger businesses buying smaller businesses. Jason: “In 2023, don’t be surprised if ‘Blank’ buys ‘Blank.'”
Jason Moser: I would not be surprised at all to see Thoma Bravo, the private equity firm, buy nCino, which is the banking software company. And nCino, they have software that automates and streamlines complex processes at banks. They utilize data analytics, AI, machine learning, all that stuff, to ultimately enable banks and credit unions to onboard clients make loans, manage the loan life cycle, open accounts. To me, this seems like a business very much in line with what Bravo’s interested in. It wasn’t all that long ago they bought Ellie Mae, for example. But you look at nCino — again, tough year. Guiding for $400 million in revenue this year, now at a $2.8 billion market cap. This is something I think that would be well within Bravo’s capability. It would not surprise me at all to see this happen.
Matt Argersinger: Nothing to do with Encino Man — great early ’90s comedy movie.
Jason Moser: So good, so good.
Chris Hill: Matt, what about you?
Matt Argersinger: Don’t be surprised if Blackstone, Starwood, insert your favorite private-equity company, buys Live Nation. Live Nation has been in the news lately. They’ve got their Ticketmaster controversy going on. There’s calls to break up the company. They own some really great properties. I could see a private-equity company coming in, buying them at a distressed price, spinning off Ticketmaster, and then owning those great assets and that performance business. And it’s one company I’ve been looking at to buy, but I feel like there’s a lot of controversy around it right now, but not too much for a larger company to come and probably take out.
Jason Moser: They put those Tay-Tay fans on full tilt.
Chris Hill: You don’t want to anger the Taylor Swift fans. That’s right. All right, last one, Jason: “One thing you’re going to have to give some time to is ‘Blank.'”
Think of this as maybe a trend or a company, a business that, as you like to say, you’re going to have to pack a lunch on this one.
Jason Moser: Well, speaking of food, I’m going to go back to our Thanksgiving show and my slice of humble pie: AppHarvest and controlled-environment agriculture. I think this is absolutely part of our future in our food supply chain. I think that we have a growing population, limited resources. People care more than ever before about the food that they’re eating. And controlled-environment agriculture really is one way to help shore up food supply chain issues. It is something that’s going to take a long time though. My mistake in that investment was being way too early to the game.
Now, SPACs enabled that. For all of the interesting companies that SPACs have brought to the market, the nature of SPACs means that they’re just coming to the market far earlier than they really probably should, and that was one of the big lessons I’ve learned. Now, I will say I am still an AppHarvest shareholder, and I continue to hold my shares, and will continue to hold my shares because I’ve always viewed this as a 10-year investment thesis. It’s super-long-term investing. But it is something, if investors are interested in controlled-environment agriculture, I think it’s got a lot of potential, but it’s also going to take a long time.
Chris Hill: Two quick things. This is a stock I own as well. It has gotten knocked down to the point where I look at it now and I wonder, is this a company that two years from now is going to be a stand-alone public company? Not because I think it’s going to zero, but I think that there’s enough there and the stock price is low enough that I’m wondering if someone is going to swoop in and buy them.
Jason Moser: Yeah. That thought has definitely entered my mind as well. I am not concerned with them as a going concern. They’ve locked up a lot of really important funding, and some FDA-backed loans as well. They’ve got the right people on their side, but it is something that strikes me that very well could be an acquisition target, and if that’s the case, well, so it goes.
Chris Hill: The second thing — after a year like 2022, as an investor, I don’t think I’m alone in looking for silver linings. Am I wrong in thinking that a silver lining is that SPACs as an idea have really been pushed to the back burner, that I think at least over the next couple of years, we’re just going to see a lot fewer companies going public via SPAC?
Jason Moser: Yeah, I think that’s fair. I think we’re out of that free-money environment now, and, yes, SPACs — very, very interesting opportunities, but clearly they have underperformed in a major way, and I think that just all goes back to the nature of SPACs. You just get these companies far too early in their development, they’re not established yet.
Matt Argersinger: The contrarian in me does think, though, that the industry — it’s so maligned right now that maybe, SPACs going forward now, there might be some opportunities there.
Chris Hill: Matt: “One thing you’re going to have to give some time to is ‘Blank.'”
Matt Argersinger: Renewable energy. I think we got all excited in recent years, the past decade now, about what solar technologies, wind power technologies, even fusion now — which has been in the news recently — could do for energy production in the country, in the world. And I just think the reality is, we’ve learned that these technologies are fantastic, but they’re highly capital-intensive, they’re not very efficient still. Our power grid, our transportation systems, logistics systems are going to rely on fossil fuels probably for the majority of their power generation for many years still. So as excited as we were about these technologies and what they could do for the environment and for the economy, I think that’s one of those areas where we perhaps step back and say, well, the reality is, “Hey, oil and gas, hate to say it, here to stay probably for a lot longer than we think.”
Chris Hill: Some business shows err on the side of caution, but not us. After the break, we’ve got our reckless predictions for 2023. Stay right here. This is Motley Fool Money.
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. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser and Matt Argersinger. We’re wrapping up our preview for 2023. Reckless prediction time, Jason. We got two categories this year — one for business, one for non-business. What is your reckless business/investing prediction for 2023?
Jason Moser: Well, I think that Elon Musk will abide by the poll and actually step down as Twitter CEO. Maybe that’s not so reckless. But Chris, you know who is going to be the CEO of Twitter when he does step down?
Chris Hill: Do tell.
Jason Moser: Sheryl Sandberg.
Chris Hill: Really?
Jason Moser: There you go.
Chris Hill: She’s going to leave Meta Platforms?
Jason Moser: She’s already gone. She left Meta.
Chris Hill: Yeah, that’s right.
Jason Moser: With experience with [Alphabet‘s] Google, her experience with Meta. Musk has tried to poach her before. He tried to poach her actually while she was working at Meta for Tesla. I think he might get her.
Chris Hill: Matt?
Matt Argersinger: This is not mean. I don’t want to offend any of the crypto fans.
Chris Hill: Oh, my goodness. Here come the emails.
Matt Argersinger: But I do think there is a small but realistic chance that Coinbase Global goes to zero.
Chris Hill: Zero.
Matt Argersinger: It’s not because I hate Bitcoin or cryptocurrencies, (and I do). It’s really because if you look at their business, the vast majority of the revenue comes from retail investors trading cryptocurrencies, where they earn nice commissions in spreads from that trading. Fidelity either just launched or is in the process of launching a crypto trading platform with zero commissions, very low spreads, and I just have this feeling that it doesn’t really matter what happens to cryptocurrency prices. The fact is that there’s going to be less trading and that that trading is going to be a lot cheaper presents a serious problem for Coinbase, which is still, believe it or not, a $10 billion market cap company. I just think they’re headed for a world of pain in 2023. I don’t know if they’ll go to zero, but I see a lot lower stock price there.
Chris Hill: I believe this was Ron Gross’s reckless prediction on last year’s show. But this time it’s actually going to happen: Berkshire Hathaway in 2023 is going to announce that Warren Buffett is stepping down as CEO. He will stay on as chairman. And because it is Berkshire Hathaway, they will make this announcement in an SEC filing.
Matt Argersinger: Just an 8-K. That’s it.
Chris Hill: The non-business investing category, reckless prediction. Jason, what do you got?
Jason Moser: Well, Chris, money talks as we all know, and I think in 2023, we will indeed get confirmation that a sequel to Top Gun: Maverick is in the works officially. But it gets better, because this sequel is going to star either — or possibly both — Bob Odenkirk and/or Bryan Cranston.
Chris Hill: I mean, those two guys make everything better.
Jason Moser: I know.
Matt Argersinger: Now I’d go see that one.
Chris Hill: I think shareholders of Paramount Plus would be thrilled with that. Matt, what do you have for the non-business investing?
Matt Argersinger: I think there’s going to be a major sports betting scandal that’s going to lead to insider trading rules for sports gambling. Bear with me on this. But if you think about how big the sports gambling industry has gotten, how easy it is, and the millions and tens of billions of dollars that are now involved in it. Just imagine you’re an assistant coach on the Kansas City Chiefs. You will learn that Patrick Mahomes during the week of practice sprained his ankle. All of a sudden, you know that he’s hobbled. He’s probably not going to rush for the over-and-under on the 40 yards that he was supposed to do in this coming game. You pass it along to some friends. They bet on that. I just think the industry, the way it’s evolving presents some serious challenges to insider knowledge. And we might get some regulation just like the SEC regulates stock trading.
Chris Hill: For team executives.
Matt Argersinger: But you’d even have to extend beyond that. But yes, certainly at least for team executives.
Chris Hill: Fascinating. Let’s get to the stocks on our radar. Our man behind the glass, Rick Engdahl, is going to hit you with a question. Jason Moser, you’re up first. What are you looking at?
Jason Moser: One that I’ve been talking a little bit about recently with Emily is Topgolf Callaway Brands. Ticker is MODG. Given my work history in golf, I’ve always been a bit hesitant to invest in golf because I know how expensive it is, how hard it is, and how a lot of people try it out, they suck at it, and then they promptly quit. It’s always been a challenge from an investing perspective. But given the new name here, Topgolf Callaway Brands, you can see that they acquired Topgolf, which I think opens up a new audience to the game of golf. It gamifies it. It’s a social thing as opposed to going out there and playing 18 or nine holes or whatever. I think it just opens them up to a new audience. It brings in food and beverage revenue as well. I also think it’s pretty neat they have this golf-plus virtual reality experience. So it’s something that I’m digging into for the augmented reality service.
Chris Hill: The ticker?
Jason Moser: MODG.
Chris Hill: You couldn’t talk me into 18 holes of golf, but you could talk me into a trip to Topgolf, I’d do that with you.
Jason Moser: It’s fun.
Chris Hill: Rick Engdahl, question about Topgolf Callaway.
Rick Engdahl: I tried golf, and I sucked at it, so I quit. So what’s in it for me?
Jason Moser: Well, you need to go to Topgolf. I think that will change your view on things. Essentially, it’s like bowling for golf. You can suck at it and still have a lot of fun.
Chris Hill: Also food and beverage?
Jason Moser: Yeah.
Chris Hill: Matt Argersinger, what are you looking at?
Matt Argersinger: Put this stock in the one that I just think is stupid cheap: Easterly Government Properties, ticker DEA. This is a REIT. Now, it’s an office REIT, but they lease exclusively to federal agencies like the DEA, FBI, FDA, VA. It’s essentially, you have a 7.5% dividend yield, essentially guaranteed by the federal government because that’s who pays the rent to Easterly Government. It’s a business that’s growing because the GSA, which manages mostly government real estate, is slowly going to a leasing model instead of an owning model. I just don’t understand why this company is so cheap, trading for 7.5% yield. I own shares, and I think I want to buy more.
Chris Hill: Rick, question about Easterly Government Properties?
Rick Engdahl: I’m sorry, I nodded off for a second.
Matt Argersinger: That’s right. That’s what you should do if you own Easterly Government Properties.
Rick Engdahl: Well, all right then. I guess I’m in good shape.
Chris Hill: How did they get the ticker symbol DEA?
Matt Argersinger: Well, I don’t know how they got it, but it’s certainly appropriate.
Chris Hill: Absolutely is. Rick, you got a stock you want to add to your watchlist?
Rick Engdahl: Not really, no.
Chris Hill: Not really? You couldn’t be talked into food and beverage and a round of Topgolf?
Rick Engdahl: No. Well, I guess so. Sure. For the watch list?
Jason Moser: Beer’s on me.
Matt Argersinger: Well, now you sold me.
Jason Moser: Well, that’s a pull there.
Matt Argersinger: I know if someone’s going to be buying the beer, it better be you because you’ve got good taste.
Jason Moser: Well, thank you very much, I appreciate it.
Chris Hill: It also says something about the golf industry that, given your experience working in it, you’re like, “Yeah, this is not necessarily a great place to invest.”
Jason Moser: It’s a tough one. It’s like grills. I love my Traeger, but I’m not buying that stock.
Chris Hill: Jason Moser, Matt Argersinger, guys, thanks so much for being here.
Jason Moser: Thank you.
Matt Argersinger: Thanks for us.
Chris Hill: That is going to do it for this week’s Motley Fool Money radio show. You can drop us an email, email@example.com. That’s firstname.lastname@example.org. This show is mixed by Rick Engdahl. I’m Chris Hill. Thanks for listening. We’ll see you next time.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Chris Hill has positions in Alphabet, Amazon.com, AppHarvest, Block, Costco Wholesale, Home Depot, Johnson & Johnson, Lowe’s Companies, PayPal, Starbucks, Taiwan Semiconductor Manufacturing, Trade Desk, Twilio, and Walt Disney. Jason Moser has positions in Alphabet, Amazon.com, AppHarvest, Block, Home Depot, PayPal, Starbucks, Trade Desk, Twilio, and Walt Disney. Matthew Argersinger has positions in Alphabet, Amazon.com, Blackstone, Block, Easterly Government Properties, Home Depot, Live Nation Entertainment, Netflix, PayPal, Roku, Stag Industrial, Starbucks, Trade Desk, Twilio, and Walt Disney and has the following options: short December 2022 $105 calls on Blackstone, short February 2023 $290 puts on Home Depot, short February 2023 $340 calls on Home Depot, short February 2023 $80 puts on Taiwan Semiconductor Manufacturing, short January 2023 $80 puts on Amazon.com, short January 2023 $95 puts on Prologis, and short March 2023 $85 puts on Blackstone. Rick Engdahl has positions in Alphabet, Amazon.com, Berkshire Hathaway, Block, Costco Wholesale, Live Nation Entertainment, Lowe’s Companies, Meta Platforms, Netflix, PayPal, Roku, Salesforce, Starbucks, Trade Desk, Twilio, and Walt Disney. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Berkshire Hathaway, Bitcoin, Blackstone, Block, Costco Wholesale, CrowdStrike, Home Depot, Meta Platforms, Netflix, PayPal, Prologis, Roku, Salesforce, Stag Industrial, Starbucks, Taiwan Semiconductor Manufacturing, Trade Desk, Twilio, Walt Disney, and nCino. The Motley Fool recommends AppHarvest, Easterly Government Properties, Johnson & Johnson, Live Nation Entertainment, Lowe’s Companies, Topgolf Callaway Brands, and Warner Bros. Discovery and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, long January 2024 $145 calls on Walt Disney, short January 2023 $200 puts on Berkshire Hathaway, short January 2023 $265 calls on Berkshire Hathaway, short January 2023 $92.50 puts on Starbucks, and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.