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The Latest From Big Tech, Including a High-End VR Headset and Lock Screen Monetization

In this podcast, Motley Fool senior analysts Maria Gallagher and Jason Moser discuss:

  • The June jobs report, falling gas prices, and the shifting employment landscape.
  • Apple (NASDAQ: AAPL) and Google looking to monetize the lock screen of your phone.
  • Meta Platforms (NASDAQ: META) planning to launch a $1,000 VR headset.
  • A big rationale for Levi's (NYSE: LEVI) dividend increase.
  • The latest from Amazon, Upstart Holdings, and GameStop.

Motley Fool contributor Rachel Warren talks with Jay Jacobs, U.S. head of thematics and active equity ETFs at BlackRock, about the trends he and his team are watching in infrastructure, emerging markets, and healthcare.

Maria and Jason answer a listener's question about Warner Bros Discovery, and share two stocks on their radar: Paycom and Procore Technologies.

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 July 8, 2022.

Chris Hill: We've got the latest from Big Tech, the big macro, and a preview of the next big consumer electronics device. Motley Fool Money starts now.

It's the Motley Fool Money radio show. I'm Chris Hill and I am joined by Motley Fool Senior Analyst Jason Moser and Maria Gallagher. Good to see you both.

Maria Gallagher: Nice to see you.

Jason Moser: Hey.

Chris Hill: We've got the latest headlines from Wall Street. We'll get an update on emerging trends, and as always we've got a couple of stocks on our radar, but we begin with the big macro. The US economy added more than 370,000 jobs in June, the unemployment rate stands at 3.6 percent. The average rate for a 30-year fixed mortgage fell to 5.3 percent, and the average price of gas has fallen by $0.30 per gallon over the past three weeks. Maria, no shortage of macro data points. What stands out to you?

Maria Gallagher: I think actually right now is a really fascinating time to study the job market. As you said, there were about 372,000 new hires, which is about 100,000 more than expected. This is powered by leisure, hospitality, and healthcare. The unemployment, like you said, is at the post-pandemic low of 3.6 percent for the fourth consecutive month. Average hourly earnings rose by 0.1 percent from the last year and 0.3 percent on the month, and the number of hours worked averages about 34.5. But I think it's really interesting too. When we're looking at this record low unemployment and as that continues, but we still have inflation and we have wage increases, you have a lot more calls for unionization because I think we're in a situation where labor has more power that we haven't really seen since the late 1970s. Union membership is at a multi-decade low, but the majority of workers across sectors say they support increased unionization in their own workplaces. I think that's going to be really fascinating to see as we see more calls for increasing unemployment and seeing how that power continues to shift.

Chris Hill: Jason, what stands out to you when you look at all the macro data out there?

Jason Moser: Yeah, I agree with Maria there that labor right now does have probably more power than it has in a long time and they really need to make use of that. I think they know that they're on the clock and I think that at some point here these things obviously go in cycles. At some point here we're going to see the shoe on the other foot in regard to these jobs. We saw the labor force participation rate ticked down just a little bit. I think when you look at the data beyond just the jobs market, it paints a picture of a consumer that's starting to feel pretty pinched here. The personal savings rate for May quoted at 5.2 percent, that was cut literally in half from a year ago.

But even more concerning, I think, is it's down from 7.4 percent in 2019. Now you couple that with the fact that the ongoing revolving credit numbers, people are spending more and more on their credit cards. That was up 20 percent in April from the previous month to just over $1.1 trillion. That broke the pre-pandemic record of $1.1 trillion, and so you're seeing more people having to rely on credit cards in order to get things done. Obviously, coping with a very high inflationary environment, wages are not keeping up with that inflation. I think we're starting to see this clock, it's ticking down to a more challenged consumer which it's ultimately going to play out I think here on this jobs market. It's going to be interesting to see at what point we see that flip over.

Chris Hill: Now let's get to some of the companies that are making headlines this week. After the closing bell on Thursday, Upstart Holdings shared preliminary results for its second quarter, and the reaction from investors was both swift and negative. Shares of the consumer lending company fell 20 percent on Friday. Jason, last fall, Upstart Holdings was $400 a share and today it's below 30.

Jason Moser: Yeah. It it's obviously been a very tough slog for Upstart. Its stock is down I think somewhere around 80 percent year-to-date. I liked the value proposition applying artificial intelligence to the credit industry. It sounds great on the service, but the big question over the last several quarters was, and I think still is, how will they perform in a higher interest rate environment? I guess we're starting to see how. It is clearly becoming a more difficult environment to assess credit worthiness. I think we're going to continue to see lending balances going up, you'd got to going back to what we were just talking about in the big macro there. We'll see late payments, we'll see more defaults. I think the key really is, is Upstart going to be able to prove out their value proposition, that their AI is this predictive and is helpful as they claim it to be? Maybe it is. I don't know.

It really is going to have to be a wait and see, but you can't guide down like this and expect anything else from the market, particularly in this environment. They guided down on revenue, now they're calling for $228 million for the quarter versus 295-305 million they call for just a quarter ago. That net loss is going to become greater than they initially guided for as well. They quoted the reasons for the change first, the marketplace is funding constraints and there's concerns about the macro economy among lenders and capital market participants as they quoted in the release there, that makes a lot of sense. They also noted that they converted some loans on their balance sheet into cash and that impacted revenue growth as well. You put it all together, there are just a lot of question marks as to how this business is going to be able to perform as the cost of doing business continues to rise, and it looks like that trend is poised to continue. I just don't have this one at the top of my list, but I think really it just boils down to whether they can prove out the case that their AI is really as good as they say it is.

Chris Hill: We've talked recently about companies and Upstart Holdings is certainly one of them whose valuations have come down dramatically as you think about the second half of the year and the prospect for larger tech companies coming in, snapping up smaller ones. Do you think Upstart Holdings is now at the point where larger companies are starting to kick the tires and think about maybe making an acquisition if they can't turn it around on their own?

Jason Moser: It's possible, but this is certainly a very competitive environment. There are plenty of companies out there that are trying to tackle this from a few different angles, so I don't know that looking at Upstart as an acquisition target. At least in the near term, makes a lot of sense. But it's certainly possible that valuation becomes a little bit too attractive for a bigger player in this space to just glance over.

Chris Hill: This week, Amazon shook up the food delivery industry by taking a stake in Grubhub. It's part of a deal that will give Amazon Prime members food delivery perks as part of their subscription. Maria, you tell me, how do you think DoorDash is feeling about Grubhub's new partner?

Maria Gallagher: It's interesting because I think DoorDash probably isn't feeling great. There is a large group of people who now have their competitor for free essentially. But it's important to remember how much market share DoorDash has. DoorDash has about 60 percent of the meal delivery services, Uber Eats is second, Grubhub is in third place. What this deal looks like is that Prime members get a free year-long Grubhub membership, zero delivery fees. Amazon can buy additional stake in Grubhub as well in the future. But I think what's interesting is Grubhub at the end of this is either really hoping that the end of the free year, it's provided such value people keep paying for it, or that people forget that they are now paying for it and it just becomes part of your unknowing subscriptions that a lot of us have at this point. But what they're thinking and what their strategy is to retain people. DoorDash had something called DoorDash for students, and then after that ended they had customer retention of less than 50 percent. This isn't actually that proven of a strategy, so I understand where they're coming from but I don't know that that value proposition is there. I don't know that their unit economics are there, that after a year is going to be profitable for Grubhub.

Chris Hill: We were talking about this before the show, Maria. You're not only much younger than me, you also engage in food delivery a lot more than I do. It really seems like the thing where from the consumer side, there's no real big switching costs. You can have all these apps on your phones until one of these businesses steps up with some real incentive. These are businesses that at the moment aren't that sticky.

Maria Gallagher: Yeah. I don't know if anyone heard about the Grubhub free lunch in New York. That was a complete debacle in New York City where they didn't really won the drivers, they didn't really won the restaurants. People thought they were getting their lunch at 12:00. They didn't get their lunch until 4:00 PM or didn't get it at all. Grubhub doesn't really even have the infrastructure to scale the way they might want to, and so you have these incentives for users and trying to get them interested. But then when you get them interested, if they have a bad experience, I think that's going to be more of a net-negative for Grubhub than maybe they want it to be as they lost a lot of money and they didn't gain that many people liking them.

Chris Hill: If you've got $1,000 burning a hole in your pocket, Meta Platforms has the device that they would like to sell you. Details after the break, so stay right here. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money. Chris Hill here with Maria Gallagher and Jason Moser. This week, Bloomberg reported that later in the year, Meta Platforms is planning to sell a high-end VR headset called the Meta Quest Pro and the price tag will be over $1,000. Maria, that is a higher price point than I would have guessed, particularly since this is coming from a company that has poked fun at Apple in the past for selling expensive devices.

Maria Gallagher: It's a high price point and it is trying to compete with Apple's headset that is going on sale next year. It's apparently going to have better graphics processing, it's going to include high-resolution cameras, there is going to be more eye-tracking, more storage, new controllers, high-resolution displays. But it's just this continued push into the metaverse obviously. They're talking through some other advancements with very fun code names like Butterscotch, Starburst, Holocake, and Mirror Lake. [laughs] They're talking about this new line of augmented reality smart glasses, which are meant to project images onto the real world instead of just blocking with the screen, they're working on making the headsets less bulky and more easy to use, they're talking about using them for medical school and fishing with your dad was one of the examples if you're living very far away. They're working on making it applicable to a lot of different people. I think they're just continuing to try and blur this line of what is real and what isn't and are people going to pay for something that isn't real and can they make it real enough to make it worth it? I think is the biggest question on everybody's mind.

Chris Hill: It's going to be really interesting to see what consumer reviews come out about these devices when they're finally unleashed. Jason, let's stick with high-priced devices because there were also reports out this week that both Apple and Google are looking to make use of the lock screen on iPhones and Android phones, if I'm reading this correctly, I might be seeing ads pop up on my phone when it's locked.

Jason Moser: Well, it sounds like that is a possibility, that certainly what they're investigating and it seems like that happens at least in some capacity. Now, there's a start-up company called Glance in which Google has an investment. But ultimately, yeah, the idea is here that they view this lock screen as very valuable digital real estate and ultimately this is just going further upstream in order to capture those eyeballs. I can actually imagine here that advertising partners would find that to be some of the most valuable digital real estate in that it's essentially first-in-line. That lock screen is the first thing you see when you open your phone. I think really, from a consumer's perspective, this doesn't sound ideal necessarily, it sounds exhausting.

I think execution right, implementation is a question mark. How would they do this in such a way where users feel like it's helpful as opposed to a hindrance or something that they don't want? I can't imagine this is something that would offer a lower price point phone, at least in Apple's case, if they decide to pursue this, maybe Android, it seems more in line with their business model. I would hope there would be some way to opt-out of it if you're a consumer, if you don't like it, I know I would. But, again, I understand in theory, that is some very valuable real estate that ultimately is not being utilized to its fullest today.

Chris Hill: It'd be really interesting to see what pricing power comes with that type of real estate. Maria, let me tie it back to Meta Platforms for a second because Meta has already put a freeze on hiring. CEO Mark Zuckerberg made comments that some current employees may want to leave of their own accord if they're not up to the challenges ahead. Along those lines, this week, Twitter announced it's laying off some employees as it continues to try and close its deal with Elon Musk and I was saying to Jason before we started recording, I'm so happy I'm not a Twitter shareholder because the drama going on at that company just seems to go higher month-by-month.

Maria Gallagher: It seems like an episode of Succession, honestly, I'm seeing what the drama unfolds with Twitter. They laid off a third of their recruiting team, which of a group of people that I think indicates that they're probably not planning to hire again for a while, like you said, there is a hiring freeze. We are seeing this with the tech companies. There was Coinbase who both rescinded offers and laid off a bunch of people, there are hiring freezes at Facebook like you said, or Meta. I think it's interesting to see a lot of these companies that for many years were talking about how there's no end to their growth saying, OK, maybe there's an end-to-end growth or maybe there's a little bit of a slowdown of our growth that we're seeing right now. I don't think it's uncommon and I think we're going to keep seeing it over the next couple of quarters, next couple of years.

Chris Hill: Thursday was an eventful day for GameStop. In the morning, the company announced a four-for-one stock split that will take effect later this month, in the afternoon, GameStop fired its CFO and announced it will be laying off employees as a way to cut costs. A lot to unpack there, Jason, what stands out to you?

Jason Moser: It feels like, Maria said it just a minute ago in regard to Twitter, the drama, it feels like we could set up a little drama basket here, Chris. Twitter would be in that basket and I think GameStop belongs in it as well. This is the gift that keeps on giving as far as covering investing news because there's always something. What ultimately stood out to me though, is the company has made more than 600 corporate hires since the start of 2021. I can't fathom what led to that decision-making. We're not talking about store managers, we're not talking about store-based employees, we're talking about corporate hires here. It just strikes me as completely the opposite of what you would really want to do. This is a company in turnaround mode.

Anytime you are in turnaround mode, you need to be paying attention to every single cost that's going out that door. I was very surprised to see that it had become that bloated. I appreciate the fact that they are going to try to right-size the business there, it does seem like a CFO who was there for only a year. They quoted, "he was fired because he wasn't a right culture fit and he was too hands-off." Yeah, I get that. You want that CFO to be very hands-on, Chris. GameStop is just one where I'm happy to watch this one, it's entertaining, I think, from the perspective of just what goes on day to day. But, like they stay with turnarounds, oftentimes they don't end up turning around and that could be the case with this one.

Chris Hill: Thank you for those details on the CFO because whether I own shares of the company or not, anytime a CFO leaves suddenly, I'm always curious to find out why. What is the story behind that? Second-quarter profits for Levi's came in higher than expected. The iconic jeans company also announced its raising it's quarterly dividend 20 percent. Maria, nice to see the strong results from Levi's, but this is a business that has struggled over the past year. Why are they hiking their dividend this much?

Maria Gallagher: The people who are really going to benefit from this hike of the dividend are the Levi Strauss-Haas Family who still own nearly 40 percent of shares outstanding. I wrote in my notes, they gave themselves a nice little gift for doing well. They had net revenues of 1.5 billion, up 15 percent, up 17 percent in the US, up three percent in Europe, and up 16 percent in Asia. I was actually interested to see their numbers from last year that most of their sale is men's, I thought that most of their sales were women's, but 65 percent of their sales are in the men's category, so they're really shifting more and focusing more on the women's category and trying to expand in tops. Also, the global jeans market is $100 billion industry which I also didn't know, so they still think they have a lot of room to grow within that industry. But, it was a good quarter and the people who are benefiting the most is that family from this hike in their dividend.

Chris Hill: I'm actually not surprised by the gender breakdown because when I think of Levi's, I just think of men wearing Levi's, I don't know any women who own Levi's jeans?

Maria Gallagher: All my friends own Levi's jeans.

Chris Hill: Really?

Maria Gallagher: Yeah.

Chris Hill: This is why you are so much hipper than me.

Maria Gallagher: I think it's coming back in style. I think Levi's were super in fashion for a while, but now they're really making a comeback.

Jason Moser: I'm wearing Levi's right now, Chris.

Maria Gallagher: Jason's ahead of the curve.

Chris Hill: The lesson is always never listen to me when it comes to fashion. All right, Maria Gallagher, Jason Moser, we'll see you later in the show. Up next, we've got a conversation with Jay Jacobs from BlackRock about emerging trends investors are going to want to watch. Don't go anywhere. You're listening to Motley Fool Money.

Our conversation with Jay Jacobs is coming up next, but first, a message from our friends at BiggerPockets.

Dave Meyer: Real estate investing is one of the best ways to build long-term wealth. But to be a successful investor, you need to know what news and trends to pay attention to and what's just noise. I'm Dave Meyer, real estate investor and VP of Analytics at BiggerPockets. In my new show On the Market: A BiggerPockets podcast presented by Fundrise, we bring you expert perspectives in a digestible format so you can make informed investing decisions and we make it fun. I promise you, On the Market is definitely not another boring new show. Each week, I chat with a panel of experts about the latest news and trends affecting the real estate investing world. We touch on things like government policy, 3D printed houses, investing in the metaverse, and more. Join us every Monday for On the Market, a podcast designed to help you invest with confidence. Just search On the Market and your favorite podcast app, that's On the Market.

Chris Hill: Welcome back to Motley Fool Money. I'm Chris Hill. You've heard us talk on this show before about investing in trends, and in particular, trends that have staying power. One person who's focused on this is Jay Jacobs. He's the US Head of Thematics and Active Equity ETFs at BlackRock. Earlier this year, Jay coauthored The Great Acceleration, a report about megatrend changes that Wall Street may be underestimating. Motley Fool contributor, Rachel Warren, caught up with Jacobs to talk about the trends he and his team are watching in infrastructure, emerging markets, and healthcare.

Rachel Warren: There's a quote from the report that notes, "Development of the COVID-19 vaccines were highly compressed from preclinical research to official authorization. The development times were nearly 10 times faster than historical timelines for vaccine development." From your vantage point, what do you see as being some of the most exciting trends and developments that are shaping the healthcare industry at this point in time?

Jay Jacobs: At a broad level, one of the most exciting and maybe one of the most optimistic viewpoints in the world today is the growth of the field of genomics. Doing medicine at the genetic level are really refined, precise, personalized form of medicine that can treat many different diseases in ways that we've never been able to treat them before. If you think about if you go to a doctor and you say I have this issue, what do they tend to ask? They ask family history, they ask for age, they ask for gender, just really basic biomarkers. Then they tried to tell you this is the right medicine for you or this is what you might experience with this ailment.

But what if you can get it at genetic level where they really look at all the different markers that makes an individual who they are, and they can treat an individual based on those simple genetic characteristics? You can get much more precise, much more accurate forms of medicine going forward. mRNA based vaccines were a huge leap forward for genomic medicine. I suppose really the programming a vaccine at a generic level to attack the coronavirus. It's worked incredibly effectively, but it's also brought billions of dollars of investment to mRNA based vaccines. It's broad regulatory excitement around mRNA based vaccines. mRNA has been around for decades, but frankly, it didn't have the funding or the regulatory environment to support it. Now it does.

The question is, how do we take the success of mRNA based vaccines and apply it to something like the common flu or to HIV? Can it even be applied to some cancers? It's really amazing to see this technology being used in different applications going forward. Then beyond that, can we do more genetic testing to get more genetic data at the individual level? Can we build precision medicine that can edit or modify individuals' genes? There's over 10,000 diseases that if we just modified one gene in someone's genome, would completely alleviate the disease. Can we get to that finite of a level and treat people at the genetic level? I think it's incredibly exciting. I think we're really just at the beginning of this new wave of healthcare going forward.

Rachel Warren: There's so many innovations that I think are so exciting for investors to watch right now. That leads me into the third and final megatrend that The Great Acceleration report highlighted, which is the power of the purse. I want to highlight a key quote here. The report said, "While lockdown slowed economic activity, they could not derail major demographic trends. Amid the pandemic, millions of US millennials entered peak spending years, ages 35-55. Similarly, emerging market consumers cemented their places of dominant customer group representing over 50 percent of global spending. As a result of these trends, millennials and emerging market consumers are now, and will be for several decades to come, essential drivers of the global economy." Against that backdrop, what are some of the industries or sectors that you see as being most affected by these millennial in emerging market consumers over the next 5-10 years?

Jay Jacobs: We really see it as two distinct segments. One is looking at emerging food and AgTech. So looking at the millennials in the United States, this is a very sustainably minded generation that really thinks about when they're buying food, what is the source of this food? How clean is it? Is it organic? How did it get to this farmers market? How did they get to this store that I'm buying it from? They're making these really sustainable decisions. That's really important because if you're a food manufacturing company and you are developing products that are unhealthy, or unsustainable, or using more negative processes in creating that food, millennials are going to gravitate away from that product and move toward something that's healthier and a more sustainable process.

What are the companies that are leading in the process of moving toward more sustainable practices of food, we think they're going to be a big beneficiary of this millennial generation that has more money. That because they're in their peak earning years, are spending more money, because many millennials now have homes and kids. We don't necessarily think of millennials as 40-year-olds with homes and kids, but that's a lot of millennials these days. Millennials are inheriting trillions of dollars from the baby boomer generation. Their spending preferences really are going to matter a lot to the American economy, and those spending preferences are different because they care about things like sustainability much more than previous generations.

Then similarly, if we look overseas, the emerging market consumer, because of the rise of the middle-class overseas and because of the growing population that's primarily happening overseas, is now the dominant consumer in the world today. If you're a consumer packaged goods companies selling internationally and you're not thinking about emerging market consumers, you're missing out on the majority of your potential market. What are their unique challenges and unique preferences? Well, there's over two billion consumers overseas that don't have access to banking today, but they do have a cellphone. Sixty percent of them have a cellphone.

How do we think about extending financial services to those two-plus billion people overseas that have an electronic connection to the Internet? We think one of the big beneficiaries will be decentralized finance, being able to help at-scale these individuals invest, borrow, lend, all the basic banking technologies that are much more available in developed countries like the United States, but so far have not been made widely available to people in emerging markets. It's really looking about these distinct groups and thinking about, what are their unique challenges and needs and who are providing the products and services to them going forward.

Rachel Warren: I love to talk a little bit more about the thematic investing approach. What does that look like in practice? How can, we as long-term investors, weave that approach into our investing strategy against the backdrop of the current market?

Jay Jacobs: Absolutely. One of the things that we like to look at in thematic investing is what's called the adoption curve. It's really this S-shaped pattern of adoption where we see what is a technology today, pick anything that's a newer tech like electric vehicles. We can look at, at one end of the curve is, what is the total addressable market? In the case of electric vehicles, it's basically the 90 million or so cars that are sold each year. Then how many cars are actually sold that are electric? Right now, we're in high single-digits penetration, so we're around 7, 8 million electric vehicles being sold each year.

We have a lot of ways to go for that adoption. We think about things like, what will it take to get that adoption? Is it cost? Is it quality? Is it just espousing the benefits of electric vehicles? Is it the infrastructure? But really trying to understand, what is the conviction behind this theme and what is the opportunity behind this theme? That is step 1. Step 2 is, is this theme investable? Many of these really powerful structural trends we're seeing around the world today are investable and many are non-investable. The idea behind investability is, can we find a basket of companies that has high purity to this theme? Sticking with the electric vehicles example, I'm sure you can think of many famous electric vehicle companies, but also ones involved in lithium mining and battery production and parts and components for electric vehicles.

Really thinking about that entire ecosystem that would benefit from the rise of electric vehicles. We think about conviction. We think about investability. Then the third thing we think about is time horizon. When is this theme likely to take off? Is this going to happen tomorrow, which would be very soon? Or is this going to happen to 100 years from now, which would be very far away? Really the sweet spot for us is thinking 5-20 years to that future, which gives us plenty of time to develop the theme, to research the theme, to bring it out to investors, and it doesn't put as much of an emphasis on entry and exit points. This is not a trade, this is an investment over time. When we think about those three checklist items for thematic investing, that's how we arrive at many of the themes that we've discussed today.

Rachel, in terms of your question of, where does this fit in the portfolio? This is actually a slightly more nuanced question for thematic investing because many themes cut across sector and cut across geography. We don't care if an electric vehicle company is in the US or if it's overseas. We don't care if it's categorized as a tech company or an industrials company. We're trying to find the companies that are best positioned to benefit from the materialization of this theme. Sometimes that makes it a little bit harder to fit in the portfolio. But what we suggest is that people keep a core portfolio intact using a very efficient, broad-based core. Then they create a satellite portfolio where they might put three or four themes in that satellite where they understand that this might have more tracking error to something like the S&P 500, it might be a little bit more volatile because these are concentrated positions, but also that this satellite is designed to be a long-term buy and hold piece of one's portfolio.

Rachel Warren: I think that's a really helpful and informative way to break down that style of investing. We're certainly dedicated to long-term investing here at The Motley Fool. Something I know as well that you and your team have written about and discussed often recently, is the resilience to certain types of sectors have particularly in a current inflationary environment, but also over the long term. One of the sectors you've identified is the infrastructure space. I'm curious in your view, what sectors within the broader infrastructure industry pose the most compelling opportunities as you see them now for long-term investors? Then what are some of the durable driving factors that are beyond the current inflationary environment?

Jay Jacobs: Absolutely. Infrastructure is one of the themes that we're most excited about right now, and it's for several reasons. We really look at infrastructure in two different ways. One is, who's enabling infrastructure? Who's building the infrastructure or rebuilding the infrastructure in the United States and around the world today? That can be construction engineering companies, that could be machinery companies, that can even be raw materials companies that produce things like cement and steel that got used in infrastructure. We just had last year the Infrastructure Investments and Jobs Act passed Congress, which was a $1.2 trillion bill to accelerate the reinvestment in US infrastructure. We believe those enablers that are building that infrastructure are going to be the big beneficiaries.

They're going to start seeing the cash flow from that congressional act to rebuild US infrastructure. We see them as immediate winners. Over the long term some of the other winners are going to be infrastructure asset owners. These could be people that operate airports, toll roads, highways, bridges, different pipelines, and electric companies, and water utilities that benefit from this reinvestment and infrastructure. Because previously these companies had to spend the money on it. They had to use their own capex to improve an electrical power line. Now the US government is going to pay for it. That's a good thing for these businesses and they're really going to get to benefit from the passage of this act and the improvement of infrastructure around the country.

Also, we believe a lot of those infrastructure asset owners are very well positioned in this inflationary environment because a lot of their contracts are tied to CPI or PPI, meaning the amount that they're able to charge for their service automatically adjust when inflation rises. They have a built-in layer of inflation protection, which is really enviable by many companies in this type of environment where they can just naturally start to raise prices due to their contracts. We believe infrastructure is really this dual-faceted theme with enablers and asset owners, that is also uniquely well-suited for this inflationary environment. Then over the long term just has incredible tailwinds because of this reinvestment and infrastructure which will take several years to be put into place.

Chris Hill: Coming up after the break, Maria Gallagher and Jason Moser return. They got a couple of stocks on their radar. So stay right here. You're listening to Motley Fool Money.

As always, people on the program may have interest 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 once again with Maria Gallagher and Jason Moser. Before we get to the stocks on our radar, we've got a question on the Motley Fool Money hotline. Dan, what do we have?

Tyler: Hey Fools, this is Tyler from LA, is Warner Brothers Discovery stock going loony? It's down 30 percent since becoming bigger and probably better. I know the market is concerned about the money that's being spent to producing content that the CEO, David Zaslav, seems to be making the right moves by trying to cut budgets and spend money wisely. Evaluation seems to be attractive because of the IP Warner Brothers Discovery has, but the stock is a falling knife at the moment. Thoughts on this. Thanks. Have a good one. Bye.

Chris Hill: Thank you Tyler in LA for a great question. Jason, we talk a lot about streaming video and entertainment. Warner Brothers Discovery is not a company we talk about as much, although parent company of HBO Max, we talk about that when we're talking Netflix and Disney Plus and all that thing. What do you think to Tyler's question? This is a stock that has been knocked down, but the CEO, David Zaslav, is not being shy about making moves.

Jason Moser: No, he's not. It's not his first rodeo either. Thanks for the question, Tyler. I think it's a really good one. We are seeing just such a massive shift here in the media landscape and the streaming landscape, the ways to go about doing it, distributing that content. I think that ultimately hit in on this a little bit, Warner is going to need to figure out ultimately what that strategy is for them. What strategy is going to work best for them. That is ultimately still a work in progress right now because this merger is still so new. We do need to give them some time, I think, to really decide. Brighten or articulate what that strategy is. Mergers like this come with a lot of cleaning up of old messes, investments that weren't panning out, reprioritizing of strategies. It's not like they are alone either. You look at streamers in the space, Disney's down close to 40 percent year-to-date, Netflix is down 70 percent year-to-date.

This is a very tough business where companies are spending a ton on content, but not yet realizing the profits from this, as this landscape continues to shift. But you made a really good point there in their IP. You've got these brands that just have to have done so well for so long and it will continue to keep on giving. Whether it's HBO, whether it's Food Network, HGTV, whatever it may be. They do have a lot of valuable IP there and I believe they'll be able to exploit it. I think they just need a little bit of time. I think the unknown here, in exactly what the strategy is, is probably what has the market on the sidelines, but the known in that valuable property, in the intellectual property that they have, I think it help offset that. This could very well be an opportunity.

Chris Hill: If you'd like to give us a call, The Motley Fool Money hotline number is 703-254-1445 ask a question about stocks. Tell us where you're from. Let us know if you're a Motley Fool member as well, 703-254-1445. Let's get to the stocks on our radar. Our man behind-the-glass, Dan Boyd is going to hit you with a question. Maria Gallagher, you're up first. What are you looking at this week?

Maria Gallagher: The stock on my radar is Paycom, ticker symbol PAYC. You might be familiar with this company. It does payroll and other human capital management services. But one reason I'm interested in it is what we've been talking about a lot is things like recessions, inflations, and what they do is they specialize in small and medium-sized businesses who will really show, I think, how the economy is really doing and how that evolves in the next couple of quarters. I think it's going to be really fascinating to hear their take on the current market environment and see how companies are spending their money with them.

Chris Hill: Dan, question about Paycom?

Dan Boyd: Absolutely Chris. Maria, payments software is a pretty saturated market. What really separates Paycom from the other players in the space?

Maria Gallagher: What they do, it's pretty interesting because they do focus on those small, medium businesses. I think they've really carved out a really good name for themselves in that niche and they are with you from recruitment to retirement. They help with your HR systems, they help with all your payroll. What you see as people go on the platform and then they keep spending more and they have really high retention, especially within that small, medium business. I think where they operate is really what differentiates them.

Chris Hill: Jason Moser, what are you looking at this week?

Jason Moser: Digging more into a company called Procore, ticker is PCOR. Procore is a provider of construction management software. They focus exclusively on construction and connecting the owners and the general contractors, especially contractors, architects, and engineers. Think [inaudible 00:38:34] industries, Chris. In order to collaborate really from any location, I think that really is what it's all about for them. They break out a four product categories: pre-construction, project management, resource management, and financial management. I think one potential advantage is, they're open application programming interfaces, there is APIs, and they have an application or app marketplace. This ultimately allows customers to integrate Procore products with their own internal systems. That could be ultimately an advantage but I'm looking more into that as I try to learn more about the company itself.

Chris Hill: Dan, question about Procore Technologies?

Dan Boyd: Not really a question, Chris, more of a comment. We could follow this one under things that make sense. Procore Technologies is housed in Carpinteria, California, which of course, Carpinteria is Spanish for carpentry. Got to love that.

Jason Moser: Yeah, I do love that. That's a great selling point there, Dan, thanks.

Chris Hill: Two very different businesses, Dan. You've got stock you want to add to your watch list?

Dan Boyd: Listen man, I said it, it just makes sense to me. I'm going to go Procore. Let's all visit Carpinteria, California, one day.

Chris Hill: Road trip. Jason Moser, Maria Gallagher, thanks so much for being here.

Maria Gallagher: Thanks for having us.

Jason Moser: Thank you.

Chris Hill: That's going to do it for this week's Motley Fool Money Radio Show. The show is mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you next time.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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. Chris Hill has positions in Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Walt Disney. Dan Boyd has positions in Amazon and Walt Disney. Jason Moser has positions in Alphabet (C shares), Amazon, Apple, and Walt Disney. Maria Gallagher has positions in Walt Disney. Rachel Warren has positions in Alphabet (A shares), Amazon, and Apple. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Coinbase Global, Inc., DoorDash, Inc., Meta Platforms, Inc., Netflix, Paycom Software, Procore Technologies, Inc., Twitter, Upstart Holdings, Inc., and Walt Disney. The Motley Fool recommends Uber Technologies and Warner Bros. Discovery, Inc. and recommends the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.


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