Black Friday’s Best Stock Gifts and Investing Lessons

0:04We hope everyone had a great Thanksgiving, but now the real fun begins Black Friday shopping. Motley Fool Money starts now.

0:25Everybody needs money. That's why they call it money. The best things in life are free. But you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I'm Travis Hoyam, joined today by Dan Kaplinger and Asit Sharma. We're going to get to the state of retail. That's going to be kind of the theme of the day today. But let's start with what I think is the biggest story. That is, what in the world happened to Black Friday? This used to be a huge shopping holiday. Guys, I got my first Black Friday email from retailers. This started coming in October 31st.

1:03The real flood started November 5th. That's more than three weeks for what used to be a single-day holiday. And they still say Black Friday sale. Asit, what in the world is going on in retailers right now? Well, we're seeing the desperation heave, right? As consumers have pulled back over the last couple of years, so much more depends on this group of days, starting with October 30th or 31st. and running on through. I mean, it used to be such an event and retailers took such great advantage of our excitement as consumers. The biggest retailers, the ones that really moved the needle in the industry, of course, are the ones who've made lots of investments in shipping and logistics.

1:49So they have the ability now to make money across a spate of days and that puts pressure on the rest of the industry to respond. And so it's sort of never ending. And by the way, I saw my first Christmas trees not long after Halloween out there. So, there's some more merchandising ahead. But I think this is a natural evolution of the way, just as in big tech, we see fewer companies swing the results for many. The imprint of Amazon and Walmart, Best Buy, these big retailers, is something that the entire industry has to adapt to. And unfortunately, for some of us who used to have fun on Black Friday, that means it's a never-ending slog to find deals and keep trying to stay awake late at night for some of us clicking away.

2:34Dan, one of the things that seems to really change with retailers is there was sort of a formula there, right? You'd probably sell these TVs at a loss, you know, 15, 20 years ago. But then somebody would come in and they would buy a bunch of other stuff. And at the end of the day, you had a huge sale day. You made your margin that you needed to. And now it almost seems like that playing field has leveled out because if I'm looking for a TV, I can just go online. I can even ask ChatGPT, what is the cheapest, best value TV at a certain price point or a certain size? So is this just another example of retailers being put under pressure by these big online names that Gossett mentioned?

3:15I think so. And it's also a lot of those big retailers have made big online pushes themselves. I mean, look at Walmart. Walmart is more interested in its online business than its retail business. That's why it's moving its stock to the NASDAQ to position itself as a tech company. So I just think that in-person shopping, it used to be more fun than it is now. It used to be you had the incentive. You'd get up at 4 a.m., you'd go to the store, you'd get the deal. You'd get the deal that nobody else would get. That was your payoff. Right. And that's what you got. Now, there's FOMO of not finding the best deal that is out there.

3:53If you go to the wrong website, oh, I only got 25 % off. If I'd gone to this other website, I could have gotten 30%. Or if I clicked on it 5 a.m. instead of 6 a.m., it's just kind of nutty. And so now it's almost like this adversarial relationship. Like, if you don't get the absolute best deal, then you find out about it later. You're angry at that first retailer who you did business with. And that's not the relationship that retailers are trying to have. I didn't think we were going to be nostalgic for the running through Target at four in the morning or the fights that ended up happening over, you know, Nintendo 64.

4:29That was my thing from my childhood. But I guess here we are. Maybe that was kind of more fun times in shopping. We did get some data this week. Actually, this morning as we're recording, we're recording this a few days early. Dan, the numbers are up. Retail numbers are up. But what is the bigger story here as we look throughout the year? We had tariffs coming in in April. That was a huge story that we talked about a lot. We're maybe starting to see some of that impact, but we're also not seeing consumers completely crater. So what did we learn from this preliminary data? This is not up to date.

5:02We still have delays because of the government shutdown, but what do we know right now? Yeah, this is September data that we're looking at. And retail sales up 4.2 % year over year from September 2024. That includes a bunch of stuff. It does not include natural price increases, though. So you take a look at CPI up 3 % over the same period. You're really looking at just like a 1.2 percentage point increase in real terms, inflation adjusted returns on retail sales. And when you look at the numbers, Travis, it's not quite as good as that because a lot of that extra spending is really more towards the essentials, the staples types of areas, things like food, clothing, essentials.

5:45When you look at discretionary spending, not quite as healthy. We saw some strength in autos, but I think some of that, again, September numbers, we saw sort of a pull forward in September as EV credits expired. And so I think that the picture here, maybe not quite as rosy as those headline numbers would make it sound. Asad, how are you thinking about the state of retail? And then how does inflation play into that? Because we've been talking about that all year. 3 % is not nothing. It's not the 7%, 8%, 9 % that we saw a few years ago, but it's also higher than the Fed typically wants. Yeah. 3 % is difficult if your wages aren't rising by at least the same amount.

6:27And we've seen wage inflation cool. So, the ability of what we get paid to keep up with what we have to purchase, that's really come to parity. So, not great for the consumer. And I the retail environment is fragile. We see that buy now, pay later is being used increasingly for the discretionary side and the staple side. People are using buy now, pay later in order to purchase groceries in some cases. I think the consumer here, at least in the US, really feels stretched. Now, there are pockets of affluence and the affluence still are paying up for certain types of goods. And we've talked on this show about the success of on holdings in recent years.

7:11They're still selling into the strength of that brand. But then on the other hand, it's so uneven in the economy. I think that's a warning signal as we look ahead to 2026. Now, the US consumer has shown an ability to endure a lot longer than you or I would normally predict. But I do feel we're coming to a point where further gains in retail sales, so the ability of retailers to bring in traffic, to have a little bit of price increases that they can pass on, that is paper thin. And in fact, the preliminary data that I saw this morning indicates a little bit that those who are importing goods are absorbing for now some of that cost increase.

7:52So that's impacting their bottom lines. So eventually that likely gets passed on. It gets passed on, right. The other piece of information that came out, I think it was this morning was about half of GDP growth is apparently coming from the AI build out. So building data centers, buying GPUs, all of that kind of stuff. Asit, does that concern you when you look kind of from a macro perspective that in theory, this is, you know, this could be a revolution. But one of the ways that this pays off is that AI starts replacing job. It's kind of like a, you know, it's potentially a negative on both sides.

8:27If we keep this investment up, you lose jobs. If you stop the investment, then the economy goes south. Yeah, this one is super hard to figure out. We've had waves of this in the U.S. in the past where when you thought the U.S. economy had lost its ability to grow in a new direction, it just surprises you. And I will point to the boom in natural gas. Part of that was fracking. That was a sort of a stopgap in our economy that then let incremental GDP growth. So a little bit of growth beyond the core happened, and then we got to the next revolution. and then the next. And then so maybe two or three revolutions out from that time period.

9:03Here we are at AI. This one feels a little different, though. I've seen figures as high as like 90 % of the incremental change in GDP. So that 90 % of growth could be due to the AI build out. Now, in some ways, this is fine for the economy because there are businesses out there that specialize in construction and electrical wiring. And that's great for the economy. But the flip side of that, if we all become so much more productive, it is scary because you don't really see a through line to people having replacement income. So if my job gets taken away from by AI, you know, maybe it will one day.

9:40Maybe the three of us, our avatars will be conducting a show in a few years. Absolutely. What will we be doing? I mean, hopefully the three of us will be together having a beer somewhere. But I don't know. It's iffy. I said, it's interesting because I've taken that it's sort of shifted my investing philosophy a little bit. It used to be that I kind of shied away from over investing in high tech stocks because I kind of felt like my job had a lot to do with the success of those high tech stocks. And now at this point, it's sort of like, well, if high tech has a potential to replace me, it's sort of like, where's that income going to come from, Travis?

10:18is it's going to come from my holdings of the high tech stocks that are profiting from all this stuff. So in many ways, it's a career hedge in a way that before I kind of shied away from it as a career concentration. I like that as a, as a career life hedge. Like if you're in medicine and you're worried about, you know, hims and hers disrupting the way that you make money, maybe just buy some stock. Uh, same thing if you're, if you're in law and you see chat GPT or Gemini coming for that business. Maybe that's the way to hedge it. I do want to get to the changes that we've seen in retail. We've talked about some of these broad changes, but we're investors.

10:56And one of the things that sticks out to me is you look at over the past 20 years, this does not include dividends, but Target stock is up about 200 % in the last 20 years. That's a long time for not a lot of gains. Walmart's up about 900%, so a little bit better. But then you look at Amazon, 14 ,000%. Shopify, I don't think they were quite public. So this just since they went public, about 6 ,000%. Asit, what sort of lessons can we learn from those? Because it seems like the things that we've been talking about, Black Friday going away, it's because of these companies that are driving these gains for investors.

11:30Well, Travis, for the large part, the companies that you mentioned use their cash flow and their balance sheets. Maybe not Shopify is more of a cash flow story, but many of those retailers use their resources to invest in distribution, to invest in logistics that enabled them to take advantage of this explosion in online commerce. So we have AI now as a theme, and I think they'll continue to benefit because it's the Walmarts of the world, the Etsy's, the Shopify's, the targets that are cutting deals for conversational commerce. In other words, making deals with ChatGPT so that they can sell within that huge funnel.

12:06I don't want to reduce ChatGPT to a marketing funnel, but that's hardly going to be their destiny, right? And we'll see smaller retails also play this game because ChatGPT, OpenAI, have such a desperate need to monetize all their investments. So yeah, little fish will be able to play in this game, but that's something that you'll need to do if you're a retailer. You'll need to understand how you reach consumers at the point of consumption, which in the future is not even going to be search or a website, but it's going to be that input box for whatever LLM you're using. Yeah, that seems to me to be how retail has evolved is that retail has figured out that in many ways, they can't do things based on their traditional model.

12:51They need to take advantage of these intermediary platforms that expand their visibility. widen the scope of their products. I mean, I've got local retailers here who do business across the country, even across the world, but they wouldn't have been able to do that if they didn't have Shopify, if they didn't have Amazon, if they didn't have relationships with these bigger intermediaries. And yeah, they give up money in order to have exposure to that. So far, it's been profitable for them, or at least more profitable than just having the local business. I worry over the long term, if take rates continue to go up, if Amazon, eBay, Shopify keep trying to get bigger fractions of that dollar, is there a point where their retail partners, kind of the folks in the trenches finally decide, you know what, like you're not leaving enough for us.

13:41We're going to get out of that. It's like, are they killing the golden goose as a result of that? I don't think we're there yet, but I do look for that as a potential future risk. AI will definitely play a big role in the future of shopping. We just don't know quite what it looks like yet. So that will be really exciting to see how that plays out because it did pay off well for investors in the last big cycle. When we come back, we're going to talk about what we're giving thanks for from an investing perspective. You're listening to Motley Fool Money. In January of 1915, Ernest Shackleton's ship, Endurance, became encased in the ice in the Weddell Sea.

14:17Through determination, grit, and savvy, Shackleton would lead his men through a brutal winter, then over hundreds of miles of Antarctic ice, followed by 800 miles across some of the roughest waters in the world. It is one of the most extraordinary and inspirational journeys in the history of exploration. Find this story and many others at The Explorers Podcast, available wherever you get your podcasts or at explorerspodcast.com.

14:44Welcome back to Motley Fool Money. Thanksgiving was yesterday, but this can be a moment of reflection. So in the investing world, I wanted to ask you two, what are you thankful for? Asit, I want to hear from you first. Okay. So for all of my apparent cynicism so far in this podcast, there are a lot of things I'm grateful for that I'm thankful for, Travis. And one of them is that I live in a very advanced and wealthy society where there are numerous opportunities to carve out your destiny. And I know that's changed from decades ago and maybe even a few years ago. I do feel it's harder in this age to pursue and realize your dreams, but it's still possible.

15:22And I think, you know, the ability to make a good life for yourself and maybe those you love is important to most of us. So I'm thankful to be here. And I'm also thankful for just small moments of introspection. You know, they're so rare in this world in which we live in. I'm going to try to do a better job in the coming year of carving out those moments. We just all need to remember sometimes that we're human. We can disconnect and we can reconnect with ourselves and with others. So grateful that I can turn my phone off and be a human. And I plan to do that some more than I have in this past year.

16:01Probably something we could all do a little bit more. Dan, what are you thinking about right now? You know, I think I kind of share us its thoughts about this. It's easy for me, easy for a lot of people to focus on things that aren't going well. You know, prices are up. Housing's expensive. Lots of things are challenging today. But even in those tough times, what I kind of fall back on, what I see a lot of other people falling back onto is just how much support you can get when you're going through a tough period. It seems like no matter how much the suffering, you know, the whole world may be suffering, everybody in your community might be having difficulties.

16:41But when something really happens that takes the whole collective effort of everyone to get through it, it's just amazing how people come through, get together, put differences, little petty differences aside and really help to support each other. I've benefited from that this year. I've been really appreciative of that. Don't discount that. Don't be cynical about it. Don't take it for granted. It is really the most precious asset that you have is, are these connections that you have and just kind of the innate support that you can count on when you're going through a tough period for yourself.

17:18Count on that and then try to be that person for others when they're going through the same kind of times. Such good advice. I wanted to go a little bit different direction here. And I've spent some time in entrepreneurship. And at a time like this, I think about the people who are taking the biggest risks. We're investors here. We get to judge people and founders and CEOs and say that they're doing things right or crazy. But at the end of the day, these founders are dedicating their lives to these companies. And I'm reminded of, I was at an event at Piper Jaffrey and they brought in a bunch of interns.

17:56And one of the executives said something about how, you know, we're, we're working hard, we're doing things, we're trying to make money. But at the end of the day, we're not taking that much risk. The people that we're working for, the founders of the companies that we're trying to sell, they're taking the huge risks in business. And so I just think that as an investor, we get to ride along with that, right? And we get to be sort of the mouthpieces, the talking heads. But if you're these CEOs who started a company 20 years ago, that's a long time to make a huge investment in the sacrifices that they make along the way.

18:34in a lot of ways are not sacrifices that a lot of us would make to build the kind of businesses that they're building. So something I think is always important to think about at this time is, you know, as investors, we get to benefit from a lot of work that other people are putting in. And it's easy to think that everybody was successful because you only think about the CEOs that end up being successful. Think for everyone that you know, there's so many that didn't make it, that took that risk and it didn't pay off. It just makes it all the more special when it works. Yeah. And then you find those serial entrepreneurs, some who failed numerous times and then finally draw the lessons together and made it big.

19:10Those are fun to study as well. Speaking of entrepreneurs that could maybe use a little bit of support, go shop at your local restaurant. Those people are putting a lot of risk on the table to put food on people's tables at this time of year. So something to think about if you're willing to spend a little bit of extra money. When we come back, we are going to talk about the stocks that we would give as gifts this holiday. You're listening to the Motley Fool Money. You can get anything you want at Alice's restaurant.

19:47Welcome back to Motley Fool Money. Let's go Black Friday shopping, but let's do this investing style. Dan and Asit, I want you to buy some stocks for some hypothetical people. Maybe you have some people these ages in your lives. I pick these ages because this is who I have at home. We're going to do a new, what would you, what stocks would you buy for a newborn, an eight-year-old, a 22-year-old? So maybe somebody starting their career, starting their investing life in somebody maybe that's a little bit closer to retirement, maybe still working, maybe in early retirement. Where are you thinking from an opportunity risk profile and then them identifying with it?

20:25Asit, why don't you go first? If you have a newborn in your life and you're gifting them a stock, what are you gifting them? Travis, I'm going to gift them Amazon, symbol AMZN. We've been talking a lot about retail and we've mentioned some businesses that have been around for a long time. So think of Walmart. It's been around for decades. When you look across the landscape, I think there are a few companies that merge the longevity of retail with high tech, as well as Amazon does. And I think it will be there for someone who has 25 years of compounding in front of them. This is a business that will overtake Walmart, I believe, next year as the world's largest company by revenue.

21:04It's on track to hit a trillion dollars of revenue in just a few years annually. But it also has some amazing businesses tucked inside. As we know, it's one of the world's largest logistics companies. That's a subdivision of Amazon. It has an amazing high-profit advertising business that is challenging some stalwarts like the Trade Desk. We've heard a lot about that this year. Don't forget Amazon Web Services, which has a run rate of some$125 billion in annual revenue. Pretty big business they've got there as a little side business. There's lots of side businesses here. So I think there's enough there that this conglomerate stays together and will compound for someone who is born today.

21:44Of course, no stories without risk. So we need to think ahead of who takes over when Andy Jassy is out of the picture. But the investments it's making in AI capacity, robotics for automation, etc. are pretty impressive. So I'll give them AMZN. Dan? Travis, I stuck with the Mag7. I went with Alphabet, ticker G-O-O-G-L. And many of the same arguments, broadly speaking, Alphabet has a big business. It has a whole bunch of stuff. For folks my age, you think of Google and the internet search engine as the big driver of ad revenue, of business generally. But more recently, Alphabet's gotten into a whole bunch of different businesses as well.

22:30A lot of people kind of thought that they'd gotten themselves left out of the AI realm, and that made Alphabet, if any of those MAG-7 stocks were value stocks, Alphabet was that value stock for a long time. maybe not so much anymore. We've seen a big jump in just the past few months as people have realized that Google is not down for the count when it comes to AI. Oh, how quickly the sentiment changes on a stock like that. Exactly, yeah. NVIDIA's down, Alphabet's out, Alphabet's up. Who the heck knows? That's the stock market that we live in these days. But also with Alphabet, you mentioned YouTube.

23:08YouTube, kind of the unseen cash cow in many ways, not just generating financial success, but also visibility. It's just such a core part of a lot of people's lives. And if you have young kids, you are probably watching some YouTube at some point throughout your day. Inevitably, inevitably. Sometimes even without you thinking about it, because their embeds are in all kinds of websites that you might be in too. Add to that other ventures, You've got Waymo on the self-driving car side. You have other bets. Alphabet's got plenty of money to dedicate towards things like quantum computing. I mean, it's the wave of the future.

23:51I think Alphabet's going to be part of it. I think that a newborn can appreciate that and be in a position to benefit from the appreciation in Alphabet stock. Again, ticker G-O-G-G-O-O-G-L. Yeah, I have an 8-year-old who recently decided that he wanted to buy. some Alphabet stock. And his line was, when I search for something on Google, it's like I'm paying myself. Exactly. I thought that was great. I want to throw one in here for newborns, go a little bit higher on the risk profile side. Owlette. And this is one that we actually bought their products when our kids were little. And I think their business has gotten a lot better, 45 % growth in the most recent quarter.

24:30It's kind of a medical device, but it's an at-home device and they're getting some lock-in, that's one that, I don't know, if you let that compound for 18 years, could be a good one. But that, like I said, when we spent money on those, that was like, okay, maybe let's put a couple hundred bucks into the kids' brokerage account in this because we're buying their devices as well. All right, if you have an eight-year-old in your life, and again, we have an eight-year-old, so I have thoughts on what is going in his portfolio, but he's making his own decisions. So Dan, what are you going with if you're gifting a stock?

25:04I'm going with Roblox, ticker RBLX. I've got nephews. They are, oh boy, 13 and 10, I think they are at this point. And they are still, still playing Roblox. I thought that this might be one that they would age out of at some point. And maybe it'll come, but it hasn't come yet. And it's just, you know, Roblox has done a really good job of establishing engagement. And part of their business model has been attract those kids to start early, but then the question's always been, can you retain as they get older? And at least based on anecdotal evidence from my family, seems like the answer there is yes.