Watching Business Evolution in Real Time
the following is intended for mature audiences only listener discretion is advised nah just kidding oddly full money starts now [Music] [Applause] i'm chris hill joined by motley fool's senior analyst john ratanti thanks for being here thanks for having me chris it's not often that an iconic company attempts to dramatically change what is it doing with its business and we get to watch it in real time but that appears to be what is happening right now with ford motor because ceo jim farley is looking to separate the ev part of ford's business um i my hunch is if he could wave a magic wand he would just spin it off i could be wrong about that but at a minimum john it looks like he's trying to orchestrate it so that investors can see very clearly within the company what the ev part of the business is doing um how it is growing how it is spending money um there are a couple things i want to get to but first what do you think of what jim farley is attempting here why do you think he's trying to do this chris i think this is brilliant for uh several reasons one is the market is rewarding ev companies and rightly so with higher valuation multiples ev companies are seen as less risky because that's the way the industry is moving for sure we know that for sure so ev companies have a lower cost of capital investors want to freely lend capital or invest in ev companies and so these companies have a higher valuation the legacy auto business the ice engine internal combustion engine business is more risky carries a higher cost of capital investors don't want to lend and and buy equity in those businesses and so they have lower valuation multiples so this this makes uh this makes a lot of sense at what point do you think we're going to know because as i said this this is happening in real time i don't own shares of ford motor but i'm very interested to see how this plays out what do you think are the next couple of dominoes to fall here to enable farley to pull off what he's attempting so the the the ford family probably doesn't want to give up uh ownership and control of the business that easily i imagine that he does what you said they first carve off an ev unit a dedicated ev unit inside of ford uh with its own dedicated employees its own dedicated eventually uh facilities manufacturing facilities and they report those numbers out separately and then as the market and hopefully the ford family becomes comfortable with that carved out unit within ford then maybe the next step down the road several years down the road would be to to spin off the ev unit interestingly if ford can pull this off i imagine other legacy automakers will follow because that's that's where the industry is trending that's where the investor demand is that's where the higher valuation multiples are and quite honestly uh chris the most exit existential threat to the legacy automakers is the fact that tesla can go out and raise 20 billion dollars at the snap of a finger if it wanted to the legacy automakers can't but maybe they could as a separate dedicated ev first company and part of what is the challenge here because you know everything you said makes sense from a financial standpoint it absolutely makes sense but something that we talk about on this show and and at the motley fool in general that is important to us as investors is the culture at a company and what farley is attempting to do is grow that ev business and ultimately has i mean if we play this out into the future 10 15 20 years eventually the internal combustion engine business gets wound down and there are a lot of people at ford motor who work at that business and so you've got to be able to balance sort of the internal culture at the company keep those folks happy and motivated and wanting to come to work every day while winding down their business and i is so while he may want to ultimately uh spin off the eevee part of the business from a culture standpoint it may actually be better for ford motor that he can't do that and that he goes the route of creating this separate division so that investors like us and everybody on wall street has greater transparency into what they're doing you're right there again chris you know if they were to succeed and spin out ev completely then the other business the leaders of the other business the legacy business would just be monitoring a very slow decline into irrelevance over time of slow decline though into a relevance over time and so yes that that could create cultural issues and problems at the company that they want to try to avoid and obviously want to take care of all of your employees that have worked so hard for you over the years you know legacy automakers last thing i'll say here they're in a difficult spot because they have a lot of debt they have a lot of pension obligations some of them have dividends they historically pay dividends but they cut them or suspended them during the pandemic so they have large dividend requirements and then they have these facilities that are not optimized for evs you know they're making ice in a lot of their manufacturing facilities they're making both ice engines and evs and that's not optimized that's not the most efficient way to do it and then they also have a legacy business model of going through middlemen going through dealers and those dealers take a margin so if you want to capture tesla-like margins you have to have a change of business model you have to have a change of strategy do you think by the end of this calendar year farley will have made this switch i think this is the way the industry's going i think by the end of the calendar year he he will have carved out a separate unit inside of ford that reports separate numbers yes and and then i think others in the industry will follow it's never been more fascinating to watch the automotive industry than what we're seeing right now yes uh i said this before and i will continue to say this uh no one is getting the benefit of the doubt in the current market environment and today's example comes in the form of home depot because they wrapped up their fiscal year fourth quarter profits in revenue were higher than expected and at the moment shares of home depot are down about eight percent they're having their worst drop after an earnings report in 20 years 20 years um let's look at the business first and then we can get to the stock i mean this is a business i know you're a fan of did you see anything in home depot's reporter their conference call that stood out to you either for good or bad i mean look i thought it was it was it was one of home depot's best years ever um chris so in the fourth quarter their same store sales also called comps grew 8.1 percent sales increased 10.7 percent and earnings per share grew 21 for the full year their comps grew 11.4 percent sales increased over 14 and their earnings per share surged 30 percent chris um in the last two years cumulative home depot has grown sales by for over 40 billion dollars in two years that's just an incredible amount of sales growth for a company that's only opening chris a handful of stores a year a handful in 2021 it opened seven new stores and so to grow 40 billion dollars in sales over two years is a testament to the relevance of the brand it's a testament to the crucial nature of the products and services that home depot sells and it's a testament and maybe most importantly to the massive investments that home depot has made in the past several years into omni-channel retail into supply chain and into digital investments because a company cannot grow by 40 billion dollars in sales in two years without investing in that infrastructure ahead of that demand otherwise the company would just break but home people was able to do it and it did it under the incredible leadership of ceo craig monaire and i want to mention this because this is craig mcnair's last earnings call as home depot ceo he is stepping aside march 1st he will remain chairman of the board but he is stepping aside mark first he's one of the greatest ceos i've studied i was going to say uh ted decker who will be the new ceo has his work cut out for him he's been at the company for a while so um presumably he was picked for a reason i'm glad you mentioned the store count because when i was looking through some of the information this morning i did have that thought just sort of like i don't remember the last time i heard anything meaningful about uh home depot coming out and saying and this year we're planning to open 30 new locations you know it was one of those things where i was like they're not really growing their store count are they and in fact they're not really doing that no they're not they're they they their their store count has reached maturity they opened seven new stores this year and then they bought 14 in a tiny acquisition um in most years honestly chris they opened like five new stores so then the question becomes how do you grow if you're not opening new stores as a retailer and the and the way is two ways they sell more sales at each store so they increase the sales per store and then omni channel sales their digital sales their online sales so in the last two years their online sales have grown over 100 percent a lot of people don't realize that home depot is the fifth largest e-commerce company in the us say that again home depot is the fifth largest e-commerce company in the us fact okay well when you say a lot of people you can include me in that because i didn't i i knew they were doing well i knew they'd been investing in the omni channel i wouldn't have put them fifth overall in the country yeah no they have a massive uh digital sales channel and then those stores actually are the hub for a lot of those deliveries because 50 of their sales are fulfilled by their stores so their store count is actually a competitive advantage you did ask me if i noticed anything that would send the stock down whatever it is right now seven percent or something you know not real not really it so their comps their same store sales the trends slowed throughout the quarter so they were up like over seven percent in november 10 ish in in december and then that dropped to about five and a half percent in january so the same store um sales trend is down maybe that spooked the mark a little bit their guidance for 2022 is basically for flat sale sales slightly up and flat margins but you have to realize they're doing a massive comp they're lapping a massive number from last year rather what i think is going on is i think the market is scrutinizing company valuations and their fundamentals right now they're scrutinizing these companies closer than i've seen in a really long time gross the stocks down eight nine percent today more than 20 year-to-date i mean is this one of those buying opportunities that's just walking up and slapping investors right in the face because it it it kind of seems like it for a business that is doing this well i know it's a completely different business than nvidia is in but it's it it reminded me of what we saw last week with nvidia both in terms of the strength of the underlying business um in video with by their own admission greater growth prospects for 2022 than home depot is saying um and i think that home depot is right to be conservative in their guidance but we saw the exact same thing with the shares of nvidia dropping eight percent after a glowing report you know i don't i don't think this is a um a once in a generational opportunity to buy home depot stock of which i own but i do think yes this is a very attractive entry point for investors that maybe don't own some stock in home depot you know at where if it closes down where it is today it'll have over a two percent dividend yield and i'll probably trade at like 19 20 times earnings which is a discount to the market and it's a far above average company it's a far better company than the market average so yeah i think this is an attractive entry point for home depot john rita great talking to you thanks so much for being here thank you chris [Music] [Applause] now that we are well past valentine's day the dynamic duo of alison southwick and robert brokamp are tackling the financial planning challenges for those flying solo because single people still need to save and invest but just a little differently than their married friends [Music] in the last two weeks we talked a lot about how to manage money as a couple not just how to communicate better but also how to then tackle your goals together well guess what now it's singles night at la disco tech motley fool yes today we're going to talk about the unique financial challenges of being single and how you can take steps to come out ahead i'll start off by saying that the system was not created to benefit single people so before we get into the depressing stuff i want to highlight a recent study from the london school of economics they found that single women are actually happier and live longer than hetero married women singled men i don't have any good news for you you are less happy and less healthy and make less money than married men so whether to get married or fly solo is a personal choice but it has financial consequences let's start looking at three financial challenges of being single first of which is that singles make less money how bad is it bro well it's pretty bad so according to a recent study from the pew research center single men make a whopping twenty one thousand four hundred dollars less than men with a partner and the difference is smaller for women at eight thousand dollars but single women still earn less and this isn't an outlier a 2017 survey from td ameritrade found that single workers make 8 800 less than their married counterparts and get this a 2004 study published in the american economic review looked at identical male twins and found that a married brother made 26 more than his single twin so what explains these differences um turns out there could be a few reasons um according to the pew study single men are less likely to have a job which certainly affects your ability to earn an income on the other hand single women are more likely to have a job but what's true for both women and men is that singles are less likely to have a college degree and education is certainly highly correlated to wealth and there are also some sort of behavioral speculations so you could ask you know does making and having more money make you more attractive to potential mates and then there's the evidence that getting married is is kind of a financial kick in the pants it serves as a wake-up call to get serious about money and people actually start earning more advancing more on their jobs and saving more money after they get married in fact here's the final line in that study which found that married twins make more money quote our results suggest that marriage causes men's wages to rise now the next challenge to being single is that it's more expensive to be single because you're not sharing the financial burden of things like housing costs utilities pets furniture appliances but not only is it a matter of not going dutch on a lot of things but in some scenarios single people are discriminated against is that right bro yeah and some of it is built into the system and some of it is due to just some people having preferences for one reason or another for example some studies have shown that landlords favor married couples over single renters as for the systemic issues there are several examples but one is healthcare a worker can often add their spouse to their insurance plan they'll likely pay more but depending on the plan the cost won't double and then there's social security which is generally based on work history however with couples who've been married for at least a decade one spouse could never work a day in their life and still receive benefits just for being married to someone who worked in 2013 an analysis by lisa arnold and christina campbell published in the atlantic estimated that it cost five hundred thousand dollars to one million dollars more over a lifetime to be single in america when you add the additional expenses of being single to the institutional benefits of marriage that single americans don't get all right and for the final challenge here's a big one as a single person you are more likely to not have a close family member look after you when you're ill which means you have to pay someone to do it for you relatives mostly spouses but also kids are the most likely people to fill caregiver roles that can be everything from taking care of you when you're sick or when you're temporarily out of commission due to a surgical procedure due to short-term disability or long-term and end-of-life care this kind of care doesn't come cheap even though so many spouses and kids do it for free how expensive are we talking bro well it can vary widely depending on what someone needs but you know when a single person is sick or incapacitated they may have to pay for a range of services and we could go from door dash to lawn care to cleaning services to a home health aid which is you know a health expert coming to your house and taking care of you and that'll cost 15 to 25 an hour depending on where you live and if you need it for the whole week you're talking 700 to 1100 for that week and then there's long-term care and and frankly the majority of americans will need some type of care at some point in their lives around 90 of home-based care is provided for free by friends and relatives who in most cases are kids or spouses if you have to pay for long-term care it'll cost between fifty thousand dollars and a hundred and fifty thousand dollars a year depending what you need and whether involves going into the nursing home and here's another situation where married americans have an advantage under the family and medical leave act eligible employees can take up to 12 weeks off to care for parents children or spouses with serious health conditions it's unpaid leave but your job is protected however you can't do it for a partner friend or sibling and they can't do it for you okay enough with the depressing stats let's get into problem solving here you could always go out and just marry someone for their money no one has ever regretted that decision it always works out always always works out but aside from that what can a single person do so let's start with the boring advice first huh yeah so it's basically you can get your financial ducks in a row i know it's boring advice but it's just a fact and it starts with working to overcome the financial disadvantage of not sharing expenses with a spouse so that could include anything from getting a roommate to just being extra careful with your spending and you do have to be careful because a single person frankly has to save more they should have a good size emergency fund because if they're unable to work they won't be able to rely on a spouse to bring home the bacon and due to the way social security is designed a single person actually has to save more for retirement this was illustrated in a report from t rowe price which estimated that a single person with an income of a hundred thousand dollars should have 1.1 million dollars saved by age 65 to retire but a married couple in which only one spouse worked also with a household income of a hundred thousand dollars needs to have just eight hundred and fifty thousand dollars saved that's three hundred and fifty thousand dollars less than what the single person needs unfortunately even though single people should be saving more most surveys indicate that a single person is actually less likely to be saving for retirement than a married couple well one financial benefit of being single is that you don't have to compromise with anyone else on spending where and when you want to retire or even where to put the thermostat there is the challenge that you don't have anyone you can lean on to help you manage your finances or do you bro well most couples do share the household chores and that includes the financial chores right the most common arrangement is that one spouse handles the day-to-day stuff like paying the bills while the other handles bigger picture stuff like investment retirement planning but if you're single you have to do all the things so you have to learn more than someone who's sharing the task and you have to devote more time to doing them that said you can get some help and that could be from a traditional financial planner or from a daily money manager and these are people who can pay your bills manage your paperwork set up a budget some specialize in working with people who are running a business others specialize in working with senior citizens or maybe people with disabilities you can learn more about what they do and if there are any in your area by visiting aadm.com
that's the website of the american association of daily money managers and while i don't often recommend discussion boards because frankly they can be a hot mess of bad information there are some good ones including here at the miley fool we have hundreds of free discussion boards another place to go is bogleheads.org these are people who are big fans of vanguard and john vogel the founder of vanguard i would say reddit can be more of a mixed bag but there are three subreddits that seem to be well moderated and very popular the personal finance the financial independence and the financial planning subreddits and really the benefit of going to discussion boards is that basically it gives you community of people to whom you can ask questions you know bounce ideas off of get second opinions those types of things as we mentioned paying for health care is hard enough when you're a couple but when you're single it can be considerably more expensive so how do you manage healthcare costs right well two essentials are the emergency fund and health insurance you just gotta have them another type of insurance to consider is disability insurance it's trickier partially because it can actually be pretty expensive but the benefit is that it provides an income when you can no longer work some married people choose not to get it because their spouse's income would be sufficient if necessary so the question to ask yourself is what would happen if you could no longer work if you'd be in a real financial bind frankly whether you're married or not then consider getting so disability insurance and start by seeing if you already get some from your employer and finally we come to long term and end of life care if you do a really good job of saving all working you actually may be able to pay for this yourself out of your own assets and maybe even home equity but if you're single you should at least consider long-term care insurance with the ideal age to buy for most people being between the mid-50s and early 60s if you do too early you could be paying premiums for decades before you need the insurance on the other hand if you wait too long you could develop health conditions that would prevent you from getting an affordable policy some people are single because they've never got married but others are single because something happened to their marriage so bro let's close with some parting words of advice for the couples out there who may one day be single yeah and i hate to close on such a downer but the truth is that if you're married the odds are very high that at least one of you will be single at some point in the future either due to death or diverse and both can be financially devastating an ohio state study found that wealth drops 77 percent after a divorce and it's generally worse for women and when a spouse passes away household income can drop 50 or more yet expenses drop just 20 to 30 percent so here's what you should do now to make sure that you and your spouse are prepared for a possible future of singlehood and of course it starts with each person being capable of being financially independent that includes both knowing how to manage the household finances both having their own solid credit score and both having an ability to earn an income if necessary it can also include life insurance especially if one spouse is dependent on the other spouse's income it's also important to make smart decisions when it comes to benefits and entitlements so as an example a person could receive social security based on an ex-spouse's earnings history but only if they were married for at least a decade and you could lose that benefit if you remarry and also as we all know the sooner you claim social security the smaller the benefit but it also can result in a smaller survivor benefit for a spouse when the other spouse passes away so which is just really another reason why most people should delay social security as long as possible and finally it's just important to have an updated estate plan so that all the assets of one spouse pass to the surviving spouse as seamlessly and inexpensively as possible so yes the deck is stacked against single people when it comes to growing your wealth but just think of all the things you are saving money on stuff like going to movies you don't want to see buying food you don't want to eat purchasing furniture you hate like oh say gaming chairs and then of course traveling to see in-laws that you don't even particularly like the list goes on all that money you aren't spending though needs to still be put to work in a smart way so as a single person you can live a long happy and healthy life doing whatever you want whenever you want [Music] that's all for today but coming up tomorrow a closer look at airbnb with professor macron modi 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 only on what you hear i'm chris hill thanks for listening we'll see you tomorrow [Music]
2022-03-05 09:57
