The Stocks Behind Everyday Life

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2:43All right, folks. Welcome to the Investing for Beginners podcast. Today, Andrew and I are going to take a walk through ordinary life and talk about the stocks that you encounter on that walk. This could be a great exercise to help you find investment ideas and also kind of open your eyes to what is out there as far as things we use and familiarity and finding investment ideas. So with that, Andrew, let's take a walk. So where should we start on our journey to discover unfound or forgotten kinds of companies? Well, we can go two directions, so I'll give you the option. I think normal, healthy people would brush their teeth when they wake up.

3:27I go straight to my Keurig. So we can go one of two ways. Yes, I am that guy. And I just said that for a bunch of people. Awesome. Yeah, right. Which way do you want to go? I'm going to choose the Keurig way because that's the way my wife and I go is we go to the Keurig first and then brush our teeth after we have the coffee. Perfect. All right. Awesome. Keurig Dr. Pepper. The ticker is KDP. I've got fiscal pulled up so I can just throw some stats at you guys. I don't know how much you know about them. They kind of have an interesting backstory, I guess. I don't. Okay. I'll start on this one then.

4:06So there was like a merger acquisition type deal with Dr. Pepper and Keurig, but they're growing at mid-single digits. Revenue at$15 billion, net income margin at around 10%. So like 1.5 billion in profit. Is that a bigger company, a bigger business than you would have thought? Like keeping in mind Pepsi, Coca-Cola, Dr. Pepper, and then they also randomly have the whole Keurig business. Right. Yes. Well, no, I guess it's smaller than I probably would have thought. Okay. I would have thought that because of Dr. Pepper, that it would have been bigger. I know coffee is a very polarizing subject, as I have discovered, and Keurig people are very particular about Keurig, and then everybody else that drinks coffee thinks that we are uncouth, shall we say.

5:09Yeah, lower than. Yeah, we're lower than. We're not real coffee drinkers. That's okay. I don't want to start a war, But to me, yeah, it's smaller than I would have thought because I would have thought with the name brand of Dr. Pepper and the beverage industry just as general. I know it's not Coke or Pepsi, but it's a pretty well-known name, and you can get it at most restaurants, right? So I would have thought that that would be much bigger, frankly. Right. Yeah, so last 12 months, refreshment beverages, which I'm going to just assume, which is always a bad idea, that has the Dr. Pepper. That's$9.8 billion in sales.

5:50The coffee, U.S. coffee, is$3.9 billion. So if you think about, okay, what's the Keurig business, if we're going to make that assumption that Andrew just did, Dr. Pepper makes up two times more than the Keurig part. Yeah. Yeah. 3.9, though, still seems small. Small, yeah. Yeah, for the coffee part of the business. I mean, yes, that's a lot of coin to be thrown through your bank account, right, as a normal person. But for a publicly traded company that's got some cachet and brand name, 3.9 billion for one part of your business is kind of chump change. When you think about a company like Visa, Visa's doing$38,$40 billion in revenue.

6:37Amazon and Walmart are doing$500 plus billion in revenue. Of course, those are monster companies. But it just seems small to me. Yeah, Starbucks,$36.2 billion. 36.7 in the last two months. So to your point, when I think of the scale of a Keurig, I think everybody who knows about Starbucks knows about Keurig and vice versa. So scale-wise, it would be the same. But then, yeah, to your point, it's 10 times less. They must only do licensing revenue or something like that. Yeah, probably. Yeah, probably. Frankly, this is a company I know, other than a name and a few of their products, I know little to nothing about.

7:18Would this be something you would be interested in ever learning about or owning? My issue with it always has been ROIC is not great. And maybe that's related to the big merger, the whole Dr. Pepper Keurig thing, which I'm not going to get into, but that's always been my issue. And so it's like, okay, there's so many fish in the sea. I'm just going to move on. But could it be a great opportunity? Sure. Yeah. Yep. Okay. All right. So we've brushed our teeth. I'm sorry. We've drank our coffee now and now we need to go brush our teeth. We use Crest toothpaste. Okay. Which is, I know, owned by Procter & Gamble.

7:59Okay. So let's dive into the big conglomerate now. Procter & Gamble. All right. Looking at their numbers. Revenue,$84 billion. Now we're talking about a big business. $84 billion. Net margin's about 20%. So call it$16 billion in profit. 10 times the size of the last company we were looking at. Right. But growth, growth is kind of a different story. So talk to me about Procter & Gamble growth and all of that. You know, it's, it's an old company. They've been around for a very, very long time. I believe they're a dividend king. Is that correct? I know, I know they're a dividend aristocrat, but they might be a king.

8:43And the only reason I talk about the difference is because the company that's paid a growing dividend for 50 years or more, and as a certain size is considered a dividend king 25 years or more is a dividend aristocrat and so to pay a dividend for 50 years plus you got to be around for a long time obviously so uh in this day and age with tech companies going in and out of favor very very quickly something like procter and gamble that's been around for probably close to 100 years uh yeah a rock for sure yeah and uh you would be surprised if you go through your medicine cabinet or your toiletry area there you're going to find a lot of procter gamble products in there um so it to me you know i i don't know i don't have the numbers in front of me but if you told me that the company is growing at five percent or less it would not shock me at all yeah um that's pretty accurate actually good job oh thanks five over the last five years for diluted EPS on the Kager.

9:48So yeah, not huge. I mean, revenue, three and a half. So they are getting a little bit of earnings growth that's a little bit higher than revenue. But yeah, they are not knocking your socks off with cloud compute type bounds and leaps of growth. It is definitely not happening. So what you're saying is AI is not a part of this business. I hope not. I don't know how far away from their circle of confidence that would be. Right. You know how every company is touting AI in their earnings calls lately. Right. Even companies, you're like, what the heck does AI have to do with this? But yeah.

10:30Yeah, that's funny. Great stock for retirement, though. If you bought this thing 20 years ago or something, and now you're just collecting dividends every year, It's a great stock to just maintain your wealth for sure. Yeah. If you are a defensive investor, somebody that is very risk averse, but maybe don't want to go down the bond route, this would definitely be a really good option to choose from because you'll get a decent return and then you'll get a nice dividend. And it's about as safe as you can get, especially for an equity or a stock investment. And if you're closer to retirement, this could be potentially something that would be interesting to pivot to as you're getting closer to retirement as well.

11:15I mean, we mentioned all the brands, right? I pulled up on their investor relations just their latest earnings call. They know what they're doing. They put a bunch of their brands front and center on the first slide of that earnings presentation. Tide, Dawn, Bounty, Pampers, Always, Heaven Shoulders, Gillette, Crest, ZZ Quill, Olay. And that's probably just a smathering. So yeah, they are definitely everywhere. Yeah. Yeah, for sure. For sure. Staying in the bathroom area, let's say that you got up early and you went to work out before you had the coffee and you brush your teeth and your muscles are a little sore, it would be natural to go to the medicine cabinet and find some Tylenol and take some of that.

12:07So to help with the soreness before you go to work. And so the company that provides us with that is Johnson & Johnson. Yes. Similar story I think we might find. 90 billion in revenue, a big, big company. Net margins of 25%, so over 20 billion. That's a higher margin than I would have thought. I wouldn't think of Johnson & Johnson as a high-margin business, but apparently they are. ROE, 30%, ROIC, 15%. But like with Procter & Gamble, if you zoom out over 10 years, 2.5 % for revenue, 5 % for EPS. not knocking your socks off with the growth, but you are getting 3.2 % on the dividend. Right. Yeah.

12:58So, so yeah, it kind of the same story as Procter & Gamble. The company has been around forever and it is a stalwart in the stock market as well as in our daily lives for the products that they serve. The company I think is more, probably more a pharmaceutical business now than maybe it was in the past. And they did have a divestiture, and I don't remember all the specifics about it. It's not a company I follow very closely. KevU. Yeah. Yep. Yep, that's it. So that explains why all the numbers look good now. Right. Because they had that spinoff. So a lot of the lower margin stuff went to KevU.

13:42Mm-hmm. Interesting. Okay. Looking at revenue of only$15 billion and net margins of around$10 ,000, so$1.5. So now we're back at the Keurig scale. Right. We're at a Keurig size, and that's Kenview. I'm sorry, Kenview. Kenview. Is the name. Yeah. So again, a very stable, reliable company. Great for retirement. Great for more defensive type investors. if you're looking for a lot of growth this is not an area you probably want to try to mine much curious to know some of the brands i am lister obviously tylenol is in there and by the way they are showing a bird's eye view of some woman's bag so i almost feel dirty saying these out loud because i'm looking into her bag but we have a tylenol avena listerine band-aid neutrogena is Is that Neutrogena, the sunscreen?

14:38Yeah, probably. And then Zyre Tech. I don't know what that one is. Yeah, I mean, another one. But that's interesting, right? Procter & Gamble, a bunch of brands, a bunch of consumer brands. Johnson & Johnson now can view a bunch of consumer brands, but that scale is so different. So maybe people just want to buy more cleaning things than the whole Johnson & Johnson healthcare, skincare thing. I don't know. It's weird how the stock market can work that way. Yeah, it really is, isn't it? A lot. Yeah, a lot. What if you could get a 25 % match on every dividend you earn? Well, now you can. When you earn dividends on the Plink app, you'll receive a 25 % cash boost up to$250 bonus per year.

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17:34Download my ebook for free at stockmarketpdf.com. Okay, so let's say that we have to drive to work now. What around the car or our drive could we associate with the stock market? Yeah, too much, too much. i mean the natural place would be to look at the cars themselves and you know there's everything from tesla all the way down to like ford and gm right yeah yeah honda toyota you have bmw volkswagen porsche you know it depends on how luxury we want to go let's live the dream race r-a-c-e all right so we are now moving internationally we are in the bit index what is that i don't even know i'm not sure i think it might be italy maybe it's in euros though yeah okay yeah it is in euros we do have a faster growing much faster growing company revenue last three years 14 a year eps last three years 20 a year so definitely growing really fast roic really high 22 looks looks like a really good company yeah it's it's definitely one of the luxury luxury businesses out there they own ferrari and so they're definitely very much a luxury kind of company.

19:13What is the PE ratio? Because I think it's really expensive. 48. Yeah. Yep. That sounds about right. Gross margins, 50%, net 23. So on that close to$7 billion, they're getting almost $2 billion in profit. That's impressive. It is impressive. There are different ways to skin the cat. You can have$15 billion in revenue, like a Keurig or you can do it in half as much with this Ferrari company. Yep. Interesting. Yeah. Do you want to look at Tesla? Yeah. Are people sick of hearing about Tesla? No, let's look at Tesla. I mean, we just compared. What have they done lately? I mean, we just compared a very high quality company, right?

19:59With like luxury vehicles. So I think Tesla kind of falls into that same category-ish. Yeah. Do you think their PEs come down? No. Yeah, it's still 200. That's pretty high. Revenue at 93 billion. Very big. It is on a net margin of six, call it five, six billion dollars in profit. Do you think it's still growing though? So last three years, revenue is up 11 % annually. Last five years, up 30 % annually. So yeah, last three years, only up 11 % annually. That probably has to do with some of that. People were talking about the demand. What was it? What happened with them lately? Like they're still producing the cars, but the demand for them has slowed a lot.

20:51Yeah. And then they're also doing, they're doing price cuts as well. That's what it was. Yeah. To try to stimulate more demand. And that has hit their, definitely their revenue numbers, but also their margin numbers as well. ROIC of 18 % though. on only 6 % net margin. Okay, that's pretty good. They're pretty efficient. Yeah, that's pretty good. That's pretty good. Now, it's interesting, isn't it, that their profitability is so much less than race was, and it's kind of interesting. Obviously, their revenue is like, what, 15 times bigger than race, but their profitability is quite a bit less. The margin?

21:39yeah just our margins and and like the the over like the percentage of profit that they make from their cars right yeah yep very interesting probably a lot of depreciation expense in there yeah so we're in the car we've gotten through all that lots of lots of car companies by the way are public honda toyota ford gm tesla ferrari just to name some of the big ones that come to mind And also you can buy VW in Germany and they also own Audi. But I'm sure a lot of people already know that. Let's move on. Where are we driving to in this scenario? You want to stop by McDonald's? Yeah, let's stop by McDonald's because we got to get a breakfast sandwich, right?

22:26Just like Buffett does every day. Yeah, there you go. Now we're talking. Okay, ticker symbol MCD. Revenue only$26 billion. and then net margin is 30 % so they are at around 7-8 billion. Does that surprise you? That sounds low. Very much, yeah. Very low. I would have as big a brand name and as global as they are I would have thought it was at least a couple hundred billion. No, so that's the franchise model for you. Right. Do you know another one that's really low? Domino's Pizza. Let's throw that one in there just because I'm familiar. what would you guess their revenue is well if you're telling me that it you know that it's low and mcdonald's was low maybe 10 billion 4.78 that's it yeah wow that's crazy yeah yeah that's crazy it's a well-known name that is you know that's surprising so what i find interesting about these two companies in particular, especially because we've been doing this a while, Dave, their growth rates have slowed down quite a bit.

23:42I remember Domino's used to be almost like a compounder bro stock. The effect of that over the last five years, stock's been almost flat. 24 % over five years. 24 % total. McDonald's has also come down a bit. if you look over a 10-year period, revenue is flat. From beginning to end, revenue is at the same level. Wow. But earnings are up still pretty nicely, 11 % a year over 10 years. So that tells you they're buying back a lot of stock. Potentially. Yeah, most likely. Potentially. Yeah. Yeah. And I guess when you're looking at some of these larger, well-known, slower growing companies, that's one of the ways you can earn a decent return is when the company's buying back a lot of stock and giving you more shares of the company.

24:42That is a nice growth lever. Yeah, for sure. Okay, we're in the car now. We want to switch up the playlist. So I'm going to pull out my iPhone and then we're going to pull up a good Spotify country playlist, country music. Which of those two stocks do you want to look at? Let's look at Spotify. All right. I'm less familiar with that one. Ticker SPOT, just a few rapid-fire metrics. Revenue at almost 17 billion in euros. And then net margin, they're actually profitable now. I did not know that. So 5 % net. And that puts you at about 600 million in profits. So, hey, they have figured it out from a profit perspective, at least for now.

25:31ROIC is still super, super low. But over the last five years, growing at almost 18 % annually for their revenues, their top line. So I would definitely put this stock in the growth camp. Yes, for sure. Yeah, definitely. It's interesting that it appears that they're starting to turn a corner around profitability because for a long time they were not. Even for a period of time, I don't think they're operationally profitable either. So the fact that they have kind of started to become, I wouldn't say a mature, more mature company, but maybe they're starting to kind of turn a corner from, you know, growthy, growthy company to maybe being able to fund themselves, which is great for them and great for the people that have held the company all these years.

26:22I'm sure their returns have been very nice. profitability uh they've had five quarters of profitability okay starting in march of 2024 uh this last quarter they've gone back to negative but yeah so five quarters not bad not bad not bad and it's interesting too that they've done would you say 16 billion or so in revenue it was in euros so considering you know just to look at the like the revenue sizes of the companies mcdonald's is doing 26 billion in revenue and you think of them as this massive company and spotify is a digital business and they're in the ballpark i mean yeah they're maybe 10 billion less but still it's they're in the ballpark for a digital app which is impressive yeah i mean And PE is like 155.

27:19So these numbers look really similar to the Teslas, other than the fact that Tesla's like five times bigger. Right. But stock chart looks similar. The numbers look similar. For whatever reason, investors hate Tesla, but they love Spotify. Yeah. We won't go there. Right. Do you want to look at Apple? Yeah, let's look it up. Everybody looks at Apple. Everybody knows Apple. Let's see if there's anything interesting that we can pull out for Apple. $408 billion in revenue on 24, almost 25 % net margins. That is$100 billion in profit a year. $100 billion in profit a year. Right. I don't know what the GDP for some countries are.

28:06But it's got to be, yeah. That puts them up there, doesn't it? It does. $100 billion in profit. Right. Well, think about it. All the companies that we just, like the last four or five companies that we've talked about, if you add up all the revenues, they don't probably get to$100 billion. I don't think so. Take out Tesla. Yeah, maybe even with Tesla, they wouldn't. No, they would not. That's insane. Yeah. It is quite insane. They've had a slowdown lately. Last three years, revenue is only up 1.8 % a year, 2.8 % for EPS. if you zoom out over a 10-year period, it's 6 % for revenue and 11.8 % for EPS.

28:49And those are annual numbers. So yeah, is it maturing? Is it slowing down? They are definitely massive. That is for sure. For sure. I think the thing that probably would be interesting to see would be to look at their segment mix and to see which of the segments is growing the fastest. and I'm going to guess it's the services wearable part of the business is the fastest growing part. And I don't know if a lot of people know that. I think everybody associates them with the iPhone naturally. Yeah. So 15 % a year revenue growth in services for them. So to your point. Yeah. And then their gross profit has been growing even faster.

29:37So gross profit at 19 % a year. and the gross profit for services has almost gotten as high as the gross profit for everything else for Apple. So their fastest segment is almost their bigger profit segment. Give it a couple more years and maybe it'll surpass it. Right. So where do they get$100 billion from? A big chunk of it comes from services and to your point, it's not necessarily. I mean, yeah, it's still greater than 50%, but that percentage is shrinking compared to services. What do you think about their services? And what does even encompass that? Because I know for me personally, I pay for iCloud.

30:20It's like 99 cents a month. Some people pay for Apple TV. What else is even out there? You pay for Apple TV. Yeah, I pay for Apple TV. They have half a dozen shows or so that I really like. And I was actually thinking about subscribing to the MLS Soccer. thing on there as well. Um, you know, they have, uh, the, yeah, the iCloud I pay 99 cents, you know, for the extra iCloud, uh, stuff. But, um, I know back in a day, I don't know if it's still a thing, but back in a day, iTunes was the service you use to listen to music. Uh, I have, I've moved on from that, but that used to be a subscription as well.

31:03And I think it probably still is. I'm not sure how many people use that comparatively to Spotify. I think it's a lot of that kind of stuff, but those things are so much higher margin, especially the subscription stuff. Apple TV has gotten better over the years, like the programming and the things that they show on there. And frankly, I probably watch that more than I do Disney Plus. Yeah, it's interesting. I remember starting my first business. I had no clue what I was doing. I just knew I had an idea and I didn't want to be that guy who talked about it forever, but never actually did anything about it.