Our Pulse On the Stock Market Today

18:43Travis Hoium:So maybe we should be looking at these as free cash flow stocks, as value stocks. Is that the right way to think about it? I think that's fair. I mean, I own Nike, but I own it primarily for the dividend, right? I didn't think there's any major capital appreciated. I think the share price probably recovers from these lows eventually. But I mean, I own it primarily for the dividend because, I mean, that's going to be, I think, reliable for the foreseeable future.

19:06Lou Whiteman:Makes sense to me.

19:08Travis Hoium:When we come back, we're going to get to which one of these are their favorite stocks. You're listening to Motley Fool Hidden Gems Investing.

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19:53Travis Hoium:Welcome back to Motley Fool Hidden Gems Investing. We talked about some of the stocks that have been beaten up recently in the last segment, but I want to get an idea of where there's actually value in the market. So we're going to call this, what are the best of the rest? Let's start with restaurants, Lou. I know you are at least doing your two, three meals a day. So when you're looking at restaurants, when you're looking at restaurant stocks, what ones look attractive? I'm going to throw out five ideas for each of these that potentially could be long-term values. Darden, Texas Roadhouse, Bloomin' Cheesecake Factory, and Denny's.

20:31Travis Hoium:We haven't talked about Denny's. I feel like that's an overlook coming.

20:35Lou Whiteman:Maybe. I will continue to overlook it, though. You don't love yourself a good moons over Miami. Well, I don't know. I don't know if I've ever been in, okay? But, you know, look, a little behind the scenes for everyone at home that JMO actually did his homework here, and I didn't. So I know what JMO's going to say, and it's what I agree with. So, I am going to go off script and go Kava instead of any of those five.

21:00Travis Hoium:So, you think the growth story is going to continue for Kava?

21:03Lou Whiteman:So, here's the big thing. If you look at Kava's restaurants, they are mostly on the two coasts. And there is kind of the stereotypical Mediterranean play in flyover country, right? I think it does. And I think there's a lot of opportunity to grow. And I think at the end of the day, Wall Street pays for growth. So, I do think, and part of this is for some of these companies, saturation. So, I'm going to lean into something that, I mean, I'm biased. It's the only one of these that I personally like to eat at. So, I'm probably totally biased on that. But I do think that it's a better growth story than some of these better saturated ones.

21:40Lou Whiteman:Otherwise, on the list, I'll just let JMO take over because I think I agree with him on which of these five.

21:44Travis Hoium:I just think it's funny that Lou made a compelling argument that this entire fast, casual space is just completely oversaturated. And then the stock he's picking is the company that's trying to grow into that space.

21:56Lou Whiteman:Because, Travis, it's my favorite of them, and I'm just blinded like every other person to what you like. All right, J-Mo, what do you think? I get it, Lou. I mean, I'm a Cobb fan as well, so it's hard to argue against that.

22:09Travis Hoium:I've still never had it. Maybe I need to do a research trip and come visit. It's good. Fly over country. It's tasty. It's tasty. You know what the other thing, though, is it's fairly replicable. In other words, I make a lot of kava at home. Once you learn the ingredients that you like, you can make your own kind of kava bowl, really, whenever you want. And you usually do it for a little bit less money. But you wonder how much competition is going to get out there to try to replicate that concept. I'm sure there's already some. Danny's, listen, I mean, the moon's over my hammy. I've had more than once.

22:41It's good. It's nostalgia. But I think for me, I've got to look at Darden as probably the one that I like the most. And I think primarily, it's just because of the breadth of his portfolio. I mean, we're talking about restaurants that include Olive Garden, Longhorn Steakhouse, Cheddar Scratch Kitchen, Chewy's. You ever been to Chewy's? Chewy's is good stuff. I like it.

23:03Travis Hoium:No. Yardhouse, Ruth's Chris, The Capital Grill, Seasons 52, Eddie V's Prime Seafood, Bahama Breeze, The Capital Burger. I mean, that's a lot of restaurants. and a lot of ways for them to win, and a lot of value points for the consumer as well. They're not all just one price. You've got some higher-end, something like an Eddie V's, whereas you're going to get a more affordable meal if you get something like a Shoei's. I just like the breadth of their portfolio and think that it probably sets it up for success over the longer haul. It does seem like there's got to be some sort of opportunities here.

23:38Travis Hoium:restaurants, even if people are taking GLP ones, even if the economy is a little weak, it's kind of the one central place that you can go out and hang out with people, whether it's friends or family, and maybe lose right that we're oversupplied in certain segments of the market. But it just seems like there's got to be some sort of opportunity over the long term. All right. The next one gets to something we talked about earlier with Nike shoes and apparel companies. I got a few numbers here that I want to add in because as I was looking at these, some of the price earnings multiples just seem crazy to me.

24:11Travis Hoium:Nike, pretty normal price earnings multiple on a forward basis. These will all be forward basis. 23 times. Under Armour, 5.4 times. You got to buy a company that has negative sales growth, but 5.4 times. Lululemon, 9.6. Deckers, 14 times forward earnings. and on holding 22 times forward earnings. So you look at that list or you can add your own Lou. Where's your head go at for the best of those shoe and apparel companies?

24:39Lou Whiteman:So I'm gonna just be controversial here. And I know especially some of my colleagues will yell at me for this, but Under Armour and yes, Lululemon, I'm just not convinced they can ever get the mojo back. I mean, Lululemon, as soon as they complain that Costco has a too good of a competitor for them, I think that's a really good...

25:00Travis Hoium:That's like complaining about weather in your earnings?

25:02Lou Whiteman:Well, it's a Streisand effect. It's like, hey, everyone, the Costco pants are very, very good. I don't know. Some of these brands are just, you catch the magic, you catch the genie in the bottle, and it's really hard to get that back once it's gone. I like Nike here for some of the reasons that Jayma talked about just as a dividend play. But if anything, I'll probably take Deckers because they have a combination of brands. I know Hoka is beloved by people who seriously run. I just think that they have shown nimbleness before and an ability to reinvent. So, maybe there's more of a chance there versus asking Under Armour to reinvent or come up with something new or even Lululemon.

25:44Lou Whiteman:So, I'd probably lean here. But if I'm honest with you, I'm probably avoiding this whole category as an investor. Jason? Yeah, maybe the easiest answer is just to own Amazon and you get your stake in Zappos, right? I mean, like you own Zappos by owning Amazon. It's kind of like owning Google or Alphabet. You have a nice little stake in SpaceX as it goes. But yeah, I think, you know, Under Armour is a funny one. I've owned Under Armour forever. Now, I sold a ton of it back in the day and actually did well with the investment. And it maintained just a small position just as a core sort of, I just thought, you know, maybe one day they would kind of get their mojo back.

26:22And I think really what we've seen there is just a failure on the part of leadership, right? Kevin Plank, I think is really just, he has really struggled in.

26:31Travis Hoium:He seems like one of those, we typically want to buy companies that are run by founders, but he seems like one of those founders that had a brilliant idea, built it into a really big business and then should have handed it off to somebody else. And it's just so interesting. GoPro is another example. They're looking for strategic alternatives this week. You know, Another example of a company where the founder got it to this really, really impressive point and then just kind of went, I can't do the next thing. Yeah. Well, I think you're right. There were some bad acquisitions that he made back when they were trying to kind of get into like e-fitness and whatnot with those apps.

27:06Yeah. And so I think, you know, it was a combination of things that really has hurt the company. And by most accounts, he doesn't sound like he's really that great of a leader at the end of the day. It's kind of his way or the highway, and he doesn't seem to be open to constructive criticism and other viewpoints. And I think the company has just certainly suffered from that. It's weird because I think Under Armour makes good stuff. I mean, I do like their gear. I wear their pants every day. They're terrific. The shorts are great. I mean, it's golf equipment. I mean, good stuff on the golf course for a guy like me.

27:42But, yeah, I don't know that I see them figuring it out. I think ultimately, this is probably a situation where he's got to figure out a way just to sell this company off. I mean, something's going to happen there. But yeah, I go back to Nike. I just think I think they're a competition notwithstanding. And I think we're not seeing something necessarily just fundamental with Nike. I think the space is really difficult right now. You mentioned the Ford earnings multiple there, which I don't think that doesn't make it a no brainer. And that's, you know, that's not like screaming value play. way, it's also not screaming value trap.

28:17Again, I own shares for the dividend primarily, and I've thought perhaps about adding a little bit to it on this week, because I think it's very interesting to see some relatively meaningful insider purchases from CEO Elliot Hill and even board member Tim Cook. That speaks something to me and should to investors. It's a relevant business. I think it'll see better days.

28:41Travis Hoium:I got to make the case for on-holding, apparently because this was not only is it the fastest growing out of these companies that we've talked about they are leaning into pricing power they had they made a long-term goal of getting into a 60 gross margin which is far higher than any of these other companies they're at almost 65 so the consumer is weak and they're saying you know what we're raising prices so uh i just think here's in another idea would be i think when you mentioned just sort of a either avoiding it or play a different way to play like amazon dick's sporting goods trading for about 15 times forward earnings.

29:13Travis Hoium:So that's a, their stores have gotten more impressive over the years as well. All right, let's get to, I want to get your ideas on some of these medical companies. This is an area where I think there's innovation growth. You have more tailwinds than some of the restaurant and shoe and apparel spaces. Jason, intuitive surgical trans medics, by the way, all these stocks are down pretty significantly this year. So this is, this is why they're kind of on my radar. Abbott Labs, Boston Scientific, and GE Healthcare. You've got to pick one of those. Where does your head go? Well, I picked Intuitive Surgical back in 2019.

29:46I recommended it at our Immersive Technology Service. And shares have done well. I mean, they're up about 150%. Now, it also is an underperformer at this point. And that really kind of is thanks to the recent pullback in shares. But I still, at the end of the day, this is just a very innovative business. They've done so well with the DaVinci system to this point. And now this ion bronchoscopy machine, which I think just offers them another avenue of growth here. I mean, it clearly is a very competitive business. I mean, they're not the only ones focused on robotic surgery. You have a lot of big companies out there that are investing lots into this space as well.

30:28Medtronic, for example, and more. But I do love the innovative nature of the business. It is just this massive install base already with DaVinci, and Ion is certainly gaining some traction. So, I think I'm going to go with the intuitive. Luke?

30:42Lou Whiteman:I think that makes sense, and I agree. I think what's going on with them is more just it's a bad time for hospital budgeting. So, they're only getting the razor blades, not the razors right now. But that won't last. Look, I feel pretty good about all of these. Maybe Transmedic is the wild card just because I really want them to succeed.

31:01Travis Hoium:Incredibly volatile. stock. It's been on my radar for a long time, but I can't get my head around it.

31:07Lou Whiteman:What they do is really, really hard. And what they want to do is really, really hard. And then you throw in the logistics side of it, which is just a ton of expense. I don't believe they would have taken that on unless they felt they had to. So, yeah, I want them to succeed, but they're the ones maybe I'd question. If not intuitive, maybe GE Healthcare would be the one I'd look at here, just because I think, look, they're a little more commoditized than what Intuitive does, but the advanced medical devices, intelligent diagnostic tools, this is sort of, I think, the future of medicine more than just AI replacing your doctor.

31:42Lou Whiteman:So, I think, look, maybe it's not going to be an amazing 5X, 30X, but I just have no doubt that there will be demand for their products well into the future.

31:54Travis Hoium:Hopefully, it gives you some ideas of where there might be some values in because it looks like many segments of the market are getting pretty frothy, but these ones may be a little bit more opportunistic for investors. When we come back, I want to get Jason and Lou's thoughts about the state of inflation. And also, we'll touch on the stocks on our radar. You're listening to Motley Fool Hidden Gems Investing.

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33:44Travis Hoium: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. While personal finance content follows The Motley Fool's editorial standards and is not approved by advertisers, advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Jason, one other topic that we touched on briefly early on, but I think deserves a little bit more attention, and that's the inflation data that came out this week.

34:10Travis Hoium:We got a CPI reading. The Consumer Price Index was up 3.8 % from a year ago. PPI, Producer Price Index, So this is going to be what manufacturers and companies like that are paying up 6 % from a year ago. Energy is a big piece of the story. But the other context I want to bring in is interest rates are going up because of this. And this was a precursor in 2021 to the big market downturn and the rapid rise in interest rates. So how do you wrap your head around what we're hearing about inflation today? Yeah, I think we've talked before. I mean, this is primarily driven by energy prices. but that's not all of it.

34:50I mean, it is, I mean, the tariff impacts have absolutely played a part of this as well, right? Even with, we're going through like this refund stage now, but like we think about the, just the chaos of the last year, every day, it was a new headline on tariffs are going to be this much. Now they're going to be that much. And companies had no idea what to do. So we're seeing, you know, those costs play out as well. And ultimately, I think the interesting thing to keep in mind is just what this does for interest rates, right? The argument for cutting rates was that, well, inflation is back in check or getting there.

35:27And so we could afford to do that. Well, that obviously isn't the case. And we have a new Fed chair coming in. And while the White House is certainly going to turn up the pressure to cut rates, it's going to be very, very, like, you know, the Fed chair doesn't make that decision. They still vote. And my suspicion is that they're going to look at this and say, you know what, just logically speaking, it doesn't make sense to cut rates in the face of a rising inflation number. So, you know, it's going to be an interesting rest of the year. I mean, we're seeing all the big banks now. I mean, Goldman Sachs now expects the next two Fed cuts to come in December 2026 and March 2027, J.P.

36:09Morgan.

36:10Travis Hoium:And guessing that far out is almost always inaccurate. Right. They're just projecting. But it's interesting to think. We were talking early on in the year and late last year, the cuts were coming. And I don't think that's going to be the case.

36:26Lou Whiteman:The interesting thing here is, what does it mean for the market? Because at the end of the day, we're investors, this is an investing show, right? And warning, I'm going to go a little dark here, guys, but I do think just to look at it, U.S. wealth inequality is at a 100-year high. Going back to the Roaring Twenties, the top 50 % of U.S. households hold 97 % of household wealth. Why does this matter? That tells me that consumer spending can sustain because there is a critical mass of people who can still afford to spend. Now, there are all sorts of issues here too. And we can remember the Roaring Twenties ended up with the 1930s, so we need to be very, very careful.

37:04Lou Whiteman:But for now, does all of these headwinds, all of this inflation, will that sink stocks? I don't know if I think it will. Again, not to dismiss it, but it's a weird time right now. Yeah, it's that K-shaped recovery we talk about, right? I mean, there are plenty of people out there that, yes, costs are higher, But many of us can still deal with the burden of that. But lower earners are finding it more and more difficult. And I think that's going to be something to keep an eye on.

37:36Travis Hoium:All right, let's get to the Stock Center Radar and bring in Dan Boyd from Behind the Glass. Jason, what do you got this week? I'm sure I've all heard of Starbucks, ticker SBUX. It's a company that I've owned for a number of years. The good news is that Brian Nickel took over in September of 2024, September 9th, I think it was. The stock has returned 20 % since then, so not a bad start. The bad news, guys, is that the market is up 40 % over that same stretch. So, it is an underperformer. And we just saw news today that they announced another round of layoffs. This is the third round of layoffs since Nickel took over.

38:11And if you look back to February 2025, they were cutting 1 ,100 jobs and not filling several hundred other open positions. And then seven months later, another 900 jobs cut as part of a$1 billion restructuring plan. So, keep in mind, these are mostly corporate jobs, right? And keep in mind, Starbucks employs 381 ,000 people globally. It takes a lot to run those stores. But it definitely makes sense for the company to want to be as efficient as possible. The thing is, the stock is still over 40 times full-year estimates today, which I just think is really optimistic. So, yeah, I'm keeping my shares, but I don't know that I think it's a tremendous buying opportunity today.

38:54Dean, is Starbucks where you get your coffee?

38:56Travis Hoium:No, it is, well, okay, yes and no. If my wife wants coffee, then yes, we'll go to Starbucks, but me, no. Okay, so the answer is yes. I don't think you have a vote on this. It's hard to argue with coffee, and it's hard to argue with my wife. What's on your radar this week?

39:10Lou Whiteman:So, nothing as interesting as coffee, unfortunately. But, Dan, I am watching CHRW, ticker CHRW. So, Robinson is an asset-light shipping broker. Basically, they are the middleman that connects companies that need to move something to the trucks that can do it. The stock was down this week after the Supreme Court ruled that brokers can be held liable for doing business with unsafe trucking companies. It was previously assumed that brokers wouldn't be held at fault, so this hit the stocks. This will raise insurance costs. It will raise other costs for brokers like Robinson, but I think it will also benefit well-capitalized, best-of-breed companies, and that's what C.H.

39:47Lou Whiteman:Robinson is. I think it could actually help them gain share because they are all ready to fill this need. Stock has been on a roll until this ruling. I think any pullback could be a huge buying opportunity. I'm watching this one closely.

40:01Travis Hoium:Dan, what do you think about logistics? I love logistics, pal. Stuff's got to get places, right? All right, Dan, which stock is going on your watch list this week? I mean, they're both pretty good, right? Like it's hard to argue with coffee and again, stuff's got to get places, but I think C.H. Robinson has, you know, a little less expensive for what it is. So I'm going to go C.H. Robinson this time around. That's all the time we have on Motley Fool Money. Thanks for listening. Thanks for listening to Motley Fool Hidden Gems Investing. We'll see you here next time.

40:37I'll see you next time.