In this episode of Motley Fool Money, host Chris Hill together with Motley Fool analysts Jason Moser, Emily Flippen, and Ron Gross hit on some of the week's biggest business headlines.
Target (NYSE: TGT) is up some 20% after reporting earnings. The quarter was good, but was it 20% good? Similar stories came from Nordstrom (NYSE: JWN), Home Depot (NYSE: HD), and Lowe's (NYSE: LOW). But it was less so in the sports retail industry, where long-term health looks bleak across the board. Plus, updates from Intuit (NASDAQ: INTU), Baidu (NASDAQ: BIDU), Hasbro (NASDAQ: HAS), and more. And, as always, the analysts share some stocks on their radar this week.
Stay tuned for an interview with Dan Albert, auto historian and author of Are We There Yet?: The American Automobile Past, Present, and Driverless, about the future of the automobile.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
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This video was recorded on Aug. 23, 2019.
Chris Hill: Shares of Target up more than 20% this week and hitting a new all-time high after second quarter results -- Ron, they were great! Profits, same-store sales, it's what you want to see.
Gross: Best quarterly performance in years. Total revenue up 3.6%. Comps up 3.4%. Interestingly, same-day fulfillment services accounted for 1.5% of overall comp growth. Store traffic was up. Adjusted earnings up 24%. The company's done a great job under Brian Cornell of turning this thing around.
Hill: I'm not knocking what he's done. He's done an amazing job here. Is this a little bit of an overreaction? This seems like a great quarter, I just don't know if it was 22% great.
Gross: Well, Nordstrom was an overreaction, but we can talk about that later. This was pretty darn good. You had digital sales up 34%. Online sales now account for more than half of total same-store sales. It's what the company needed to do. They needed to spend billions of dollars to compete in this ease of delivery world we're in. Whether it's their acquisition of Shipt, they're going to same or next-day delivery, they did what they needed to do. And it took a while, but it does seem like they've turned the corner now. This is a tough industry. This will ebb and flow. Next quarter, we'll probably say something different. But for now, I say kudos.
Emily Flippen: One thing that I noted as a frequent Target customer is that they're actually planning on opening 30 small format stores across the country. If you're familiar with Walmart's neighborhood market stores, which has been relatively successful for Walmart, essentially, they're just smaller footprint stores with a more streamlined number of SKUs. It'll be interesting to see if that's successful for Target as well. I know that they drive a lot of traffic because they are your one-stop shop. Interested to see how that plays out for them.
Hill: Last thing. Ron, stock at an all-time high, is it expensive? Or do you think it still has some room to run?
Gross: They raised guidance. Based on that forward guidance, it's trading around 18 times earnings right now. So, compared to a Costco, not expensive at all. I think, if they continue the execution, it's a fine stock to own at these levels.
Hill: Let's move to home improvement. Home Depot and Lowe's both reporting second quarter results this week. Both with profits higher than expected. But Lowe's same-store sales are higher than Home Depot's, and so was the stock. Jason, Home Depot up around 5% this week. Shares of Lowe's up more than 12%.
Jason Moser: It wasn't a bad quarter for either. It does show some potential challenges here in the back half of the year. But typically, these companies, I feel like they get a pass from the market to a degree based on the markets that they serve, and the fact that both companies seem to have responded to the Amazon threat so well. I think Home Depot has probably responded a little bit better than Lowe's, but, results from both companies were fairly comparable. These were not "knock it out of the park" quarters, but both businesses deserve some credit.
When you look at Home Depot, approximately 50% of all online U.S. orders were picked up in their stores during the quarter. Second quarter online sales grew 20% from the quarter a year ago. They're clearly seeing some progress in the online business. We've talked a lot about the rental business in Home Depot before as well. That's an area where they continue to make great progress there. They see the pro customer outpacing do-it-yourself sales, despite all of the home improvement projects that I'm taking on, Chris. But, rental, 25% of the pros out there rent from Home Depot today, but they know that 90% of pros rent tools, so they see this big opportunity, and that creates a longer-term relationship with that pro customer.
With Lowe's, the big focus on getting inventory levels back down, which is a good long-term view there. You really do see an opportunity with them to get their margin picture improved over time here. To put it all in context here, sales per square foot is a way we look at these retailers today, particularly when they have to maintain that physical infrastructure. With Home Depot, sales per square foot around $460. With Lowe's, it's $344. So you can see the disparity there, you can see the opportunity for Lowe's. But right now, Home Depot's still winning.
Hill: I like the fact that you used the phrase "getting a pass from the market," because Home Depot lowered guidance for the full fiscal year. Lumber prices, much lower than they were a year ago. I looked at what they did this week, and this is a great business, but I was wondering, should shares of Home Depot be up at all this week?
Moser: Well, probably so. There's an advantage to being as big as they are. When they pull back on the revenue guidance like they did, they didn't pull back on the earnings guidance, because they have a number of different levers they can pull to keep that profitability in check. And Lowe's, to a degree, is the same. Again, I do you think it's a matter of, even though the revenue picture may be a little bit lighter than was expected at the beginning of the year, they have ways of still bringing down the savings to the bottom line, so to speak.
Gross: My guess is, this interest rate environment we're living in now, this lower interest rate environment that we seem to be moving toward, is probably helpful as well. A robust housing market probably doesn't hurt. Mortgages are at a historic low once again, I don't think that hurts.
Moser: I think you're right. We just took out a home equity line of credit and we're getting ready to undertake a master bathroom. I can tell you, the company that we're using for that renovation will be using Home Depot. That will be an example of a pro customer for Home Depot. Hey, listen, I'm glad to be a part of the solution, not part of the problem.
Hill: You're welcome, shareholders! Ron, you mentioned Nordstrom. We talked about it on last week's show, you said this is the retailer you're watching over the next six months. They had a good week. Second quarter report, profits much higher than expected, and the stock moving higher as well.
Gross: I don't necessarily think that was warranted, to be honest. I'm a customer fan of Nordstrom. The stock is a little bit challenged. It was a mixed quarter. Sales down 5%. They no longer report comparable-store sales, interestingly. They think a net sales number is good enough. Digital sales only up by 4%. It's not great. They were helped by good discipline in their inventory and with their expenses. That led to a better than expected earnings per share number. You'll take that. But, they also had to cut guidance. The stock reacted, but results were not that great.
Flippen: Yeah. If you look at the results in more detail, you see the only segment that's seeing any growth is their off-price segment. All of the stuff that they're selling at full price, their traditional retail stores, Trunk Club, all of those numbers are declining. I guess bulls are pointing toward pretty decent digital sales growth as a percentage of total sales. But that's just because total sales is declining so rapidly. I'm not sure if there's much love left for Nordstrom here.
Hill: Jason, three years ago, we were talking about Sports Authority going out of business completely. At the time, it seemed like an opportunity for other sports retailers. Now, we can look back and say, "No, actually, that was a warning for sports retailers." You look this week at Foot Locker, Dick's Sporting Goods, Hibbett Sports, they're all reeling.
Moser: And they should be. The results weren't that great. Dick's Sporting Goods was probably the best of the three, but even the earnings-per-share growth there was manufactured. Net income was down. We've talked about this for a while, with these big brands in Nike and Under Armour and Puma and Adidas all creating these relationships with the consumer, that direct to consumer relationship, it is becoming very, very important, particularly for a market like sporting goods and equipment and apparel, where there is some loyalty associated with that. I do wonder for the future of these companies. Hibbett, it's obviously a big problem with their size alone. Nothing saying that Dick's Sporting Goods couldn't eventually follow the same path as Sports Authority either, though.
Hill: All right, that concludes the retail portion of the show. Shares of Intuit hitting an all-time high on Friday despite the fact that Intuit reported a loss for the fourth quarter. But I guess, Emily, when you sell tax software, we shouldn't expect big numbers in the summer.
Flippen: No, exactly. This is a seasonally slow quarter for Intuit, which makes most of its money from selling accounting and tax software, as you mentioned. So, while there was a loss, the business actually performed pretty well. Revenue grew 13% year over year, which exceeded their guidance. Revenue from small businesses in particular actually increased 16% year over year. That's attributable to their QuickBooks Online subscribers. Lots of opportunity for them going after much smaller businesses. Subscribers to this actually increased 33% year over year, which is accelerating growth. Lots of good numbers to like here. They also have a lot of initiatives that are starting to pan out in terms of people who are self-employed. Beyond accounting software, they have loan portfolios, QuickBooks Capital, which sent out a record over $400 million in loans for small businesses. There's a lot of opportunity that Intuit still has in front of it. I actually went through their earnings call, they mentioned artificial intelligence, AI, over 20 times in the call. They see a lot of opportunity for them to improve their software for accounting and tax purposes by integrating AI. There's a little bit of AI excitement happening here as well.
Hill: Over the past year, the stock's up more than 35%. Do you think it's expensive?
Flippen: I do think it's expensive when you look at it on a forward P/E basis, which is about 33X right now. That's on low single digit revenue growth. There's an argument to be made that it's expensive. But at the same time, like I mentioned, they still have a lot of different levers they can pull in terms of increasing that growth rate, charging customers more, expanding relationships with the customers. Typically, it's hard to find good companies at reasonable prices. Intuit's a good example of that.
Hill: Shares of Salesforce (NYSE: CRM) up 6% this week. Second quarter revenue for the business software company was higher than expected. Salesforce also giving some nice guidance for the full fiscal year, Jason.
Moser: Hey, this business quarter in and quarter out seems to keep on getting it done. It's a great example of a management team, a leader in Marc Benioff, looking at a big problem there in customer relationship management, coming up with a holistic solution, and then improving on that holistic solution, adding more to it over time. You can build up switching costs if you offer up a good product. That's what we're witnessing here. It's a play on the digital economy. By 2022, more than 60% of global GDP is going to be digitized. That's essentially everything that we're doing moving to computers and phones. Certainly, Salesforce is helping companies get stuff done. Subscription revenue continues to grow. When you look at revenue total, second quarter revenue was $4 billion, which was up 23%. Subscription and support revenues makes up the gist of that $3.75 billion. They have a target here of $26-28 billion in revenue by 2023. For context, they're operating on around $15 billion in trailing 12-month revenue today. It is a stock that never looks cheap, but there's a reason why. It generates a lot of cash. They have the Salesforce Ignite team that's bringing AI and AR into the conversation with all these customers. A lot of cool things they're doing.
Flippen: Yeah, and that's all without even going into the international opportunities here. Earlier this month, we also saw Alibaba became the exclusive seller of Salesforce CRM software in China. Salesforce already has the largest market share in the world for CRM software. That's under 20%. But only 10% of their total revenue comes from Asia. There's lots of growth still ahead a bit. It goes back to what, Jason, you were saying about the fact that good companies never look cheap. That's why.
Moser: We talk a lot about the payments space. Every quarter, you and I would be like, "Oh, did you buy shares of MasterCard?" It's like, "No, we didn't buy it." And every quarter we talk about how awesome these businesses are. Salesforce, I think, is another great example. If I can shut up about it long enough, I think I'd like to add it to my portfolio.
Gross: Exact same with me.
Hill: Baidu may be the Google of China, but it's stock sure isn't acting like it. Shares of Baidu were basically flat this week after beating expectations when, let's face it, Emily, expectations for Baidu's second quarter were not that high to begin with.
Flippen: Calling it a good quarter is probably an overstatement. That's simply because the expectations were so low here. Yeah, they beat expectations, but they were pretty dismal. They're coming off the back of a terrible quarter last quarter, largely because their core business, which is ad-based revenue from their search software, has been declining, and that continued. Core advertising businesses declined 2% year over year, and that makes up about 75% of Baidu's total revenue. This is a big part of their business. But actually, their other initiatives -- their improvements into AI, that's their trigger word again, self-driving, voice recognition, their subsidiaries iQiyi, the Netflix of China -- those all offer optionality for the business. I don't think it's dead in the water yet, but it definitely is going to need to make concerted efforts into improving its app-based search if it's ever going to go back to its glory days.
Hill: On Thursday, Hasbro announced it's buying a Toronto-based company called Entertainment One for $4 billion in cash. Entertainment One produces and distributes music, movies, and TV series, including Peppa Pig, a popular animated series. Ron, I know there are a lot of Peppa Pig fans out there.
Gross: Popular to who? [laughs]
Hill: Kids, very popular with kids. But this really seems like one heck of a premium for the shareholders of Entertainment One.
Gross: Yeah, I'm a PJ Masks fan, by the way, also one of their characters, which is little superhero kids. Check it out. I like this, actually. Continues the strategy of combining toys and movies or TV shows like they've done with Transformers, GI Joe, My Little Pony. It turns out, kids like when their toys are associated with movies or TV shows. That makes good sense. $4 billion is a pricey amount to pay. It's an all-cash deal. But they get some seasoned executives, they get expanded capabilities in live action and animation, both in television and film. They actually say they're going to be able to draw out $130 million of cost savings in that dreaded word we hate, synergies, by 2020. But they probably will be able to take some costs out of this business. I certainly wouldn't be surprised. And it's going to be accretive to earnings in year one, which is nice to see. So, $4 billion's a lot of money, but maybe a nice deal for them.
Hill: Shares of Hasbro down on Friday though, Jason, because of the price.
Moser: That's understandable, and that's in line with what we usually see when these types of deals go down, is the acquirer gets dinged because the burden of proof is on them. I will say, I think Ron's right -- it is expensive, but we also have a blueprint out there of what happens if you let valuable IP slip through your fingers. Remember Mattel. Not that long ago they let all of that Disney content go, and man, that was one of the death blows for that company.
Hill: Let's get to the stocks on our radar. Our man behind the glass, Austin Morgan, has decided to go easy on you, so no questions this week. Ron, you're up first. What are you looking at?
Gross: Nice. I've got American Tower, AMT, a real estate investment trust. One of the largest owners of multi-tenant communications towers in the world. Provide a critical part of the infrastructure powering the digital revolution. Great unit economics, competitive advantages. Coming 5G revolution could spur significant growth for tower companies. They've increased their dividend, which is actually called the distribution, for the past 29 consecutive quarters.
Hill: Jason Moser, what are you looking at this week?
Moser: Earlier this week, I ran a poll on Twitter. I said, investing is all about keeping an open mind. And on their most recent earnings call, Snap mentioned AR 20 times, and Lyft, LYFT, has patents that incorporate AR into drivers' routes, pickups, and drop offs. So, if I'm bringing only one of those names to my watch list for the AR service, which one would it be? Close to 300 votes, Lyft won 55% of the vote. After speaking with Emily, she very firmly came out on the side of Lyft as well. I was convinced, I'm bringing Lyft into the world here. We're going to learn more about that business and discover whether I need to be considering it for the portfolio.
Hill: And the ticker?
Hill: Emily Flippen, what's on your radar?
Flippen: Not nearly as well-known as Lyft and American Tower, I'm looking at a company called BiliBili, ticker BILI. I talked about it a bit in the past. It's a Chinese online video streaming and gaming company. They report earnings on the 26th, next Monday. It's an interesting company. They have a really inclusive culture. Actually very similar to The Motley Fool. They have pizza day and cake day for their employees. Employees are loyal fanatics of the content that the company publishes to their site. But as you've seen with Baidu, which we talked about earlier, ad revenue, which makes up a large percentage of Bilibili's revenue, has been hard to come by in China. It'll be interesting to see how the company does in terms of pulling through that ad revenue.
Hill: All right. Emily Flippen, Jason Moser, Ron Gross, thanks for being here!
Recently, my colleague Nick Sciple, sat down with author Dan Albert to talk about the future of self driving cars, the problem with ridesharing, and much more.
Nick Sciple: How has the car evolved as a consumer product over time? The famous Henry Ford line, it comes in every color as long as it's black; today, there's a model and color for every single individual. How has the car evolved over time to become more personal to individuals?
Dan Albert: That's a very good question. It was very consciously done. So, yeah, Ford said that. It was funny. When he said that, you could actually buy a Ford in different colors. The problem was, colored paint took a long time to dry, in the order of weeks. Black paint, for different reasons, dried in a day. So, it was a production issue. It was an inventory management issue. And all of the vehicles came in black except for if you bought a very fancy vehicle. Also, the color paints didn't last.
His idea was, "You're going to buy a Henry Ford Model T and you're going to own it, and that's the last car you'll ever need to buy." And that worked for a while. And in a way, it was a surprisingly short amount of time -- 1909 was the first full year of production; by 1925, certainly, sales had fallen off a cliff. And by '27, he stopped making them. The reason? General Motors, under Alfred Sloan, most important CEO maybe in American history, got together with DuPont, and they came up with a new paint. It was called Duco. Wow, colors! Blue, red over tan, you could get two tones. And these came out, I think about '27. Actually, a little earlier were the first ones. And people ate it up.
So, his idea was, "Let's stop selling cars because there's plenty of used cars. We're not selling transportation. We're selling new." And that was the beginning of planned obsolescence. And he said quite clearly, "I want people to come to the showroom and see this year's car and have them feel like their two-year-old car that's perfectly serviceable is old, and they need something else." It was fashion. Also, he had this idea of laddering -- a car for every purse and purpose. In other words, you start with a Chevrolet, if you're lucky you move up to an Oldsmobile, then a Buick, and then if you really get into the C-suite, if you become an executive, then you can get a Cadillac, and you've really arrived.
So, those two things -- that aspiration to have a better and better and more luxurious car, which signaled your position in the society; and also to keep up, and to always have a new car -- I think is important. And it's funny. Nowadays, people lease cars. They hold them for three years, then they turn them in. So in a lot of ways, even though the cars last much longer, people still do that.
Sciple: Talking about changing of the car, softening folks up to the prospect of driverless cars -- Mac Greer is one of our producers here, he talks about, he loves driving his manual transmission vehicle. We've seen those continually become less and less over time. Is that also part of the softening up drivers to be ready to lose a connection with your car over time? Do you see that as a factor contributing to how things have changed? The relationship with the car is not as direct as it once was?
Albert: Yeah, I think it's true in all kinds of ways. You can't fix your car very easily. I do car repair. It's more and more difficult, and less and less satisfying, in a way. You buy a new box, you take out the old box, you put the new box in. You don't have to really think it through. You don't have to do all kinds of adjustments. And that's a good thing. The cars run better, they're far more reliable. But it's also one of these ways in which we become disassociated from the automobile. I think things as simple as the Sunday car wash. You sit in the driveway, your kids come out, you wash the car. Doesn't happen anymore. Even now, the vehicles taking over. Everything from something like electronic stability control, you don't have to know how to handle the skid. And obviously, GPS is a big one. We tend not to navigate anymore. We tend to follow the voice. So, all of those things are little tiny steps toward being insulated, isolated from the experience of driving, and losing some of the experience of driving.
One last thing I'll just mention is, young people now sit in the backseat. That goes back to the 1990s and the dangers of airbags. If you look on your sun visor, you'll see there's still a warning, don't put the kids in the front seat. Well, now you've grown up being chauffeured. Of the reasons kids don't get cars as much as they used to -- and I say kids, everybody under 30 is a kid to me -- is that they're used to being driven, and they rely on their parents to a much later age, and riding in the back of an Uber makes complete sense.
Sciple: Do you see that shift actually taking place -- us moving away from individual ownership of cars, more toward a sharing economy? Do you think that's a realistic vision of the future?
Albert: I like to say, I don't predict the future, I predict the past; I'm a historian. [laughs] But, I will say, there are a lot of reasons -- people talk about peak car now, that we've reached the peak of car purchases, and it's going to go away. Two things to think about. One is, of course we've reached the peak of car ownership. There are more cars than there are licensed drivers in this country. You have to stop and think about that. That means, even if we all drove all the time, there'd still be cars sitting around, parked. I think the other thing, very practical thing you have to think about, is young people who have college debt, who are struggling to find work that pays as well as it maybe it did in the past, find it hard to purchase a car. I think also, cars have become more soporific. It's really hard to get excited about a lot of these cars unless you're looking at a real luxury car, a high-end car. So, I do think there is this transition, and I do think there's a lot to say about, particularly when you're traveling or when you're going into a city where parking is, say, $50 an hour or whatever, that mobility-as-a-service makes sense. So, I do see that coming on.
The last thing I'll say is, that's not a good thing. What we're seeing in places like New York and others is more congestion, pulling people off of mass transit, inducing travel. That's one of the most interesting findings. About 11% of trips, people say, "Oh, I wouldn't have taken that if I couldn't have gotten an Uber or a Lyft to do it."
Sciple: One other point you mentioned -- people aren't very excited about the new cars coming out today. I think one area where folks are really excited is a company like Tesla, these new car companies coming onto the scene. You talk about in the book the real trouble that independent car companies have had to succeed against the big three U.S. auto manufacturers. Why have independent auto companies struggled so much in the U.S. since the auto industry has matured?
Albert: It's a good question. It ultimately has to do with access to capital. I'll tell you two quick stories. One is Tucker, which a lot of people might know, Preston Tucker coming out of World War 2 was going to be a new car company. He did a lot of things that -- it's interesting. If you look at Tesla, they've done selling accessories that didn't exist yet, things that didn't look too good. In the end, he was acquitted of all those concerns. But by then, the damage had been done. Also, factories coming out of World War 2 were assigned. The federal government assigned factories to auto companies. Those tended to go to the big three. They tended to go to General Motors, Chrysler back in the day, and Ford, because those are the big companies and they had the productive capacity and the government wanted a lot of cars built. It was important to build a lot of cars for a variety of reasons.
The way you make money today, the way you profit today as an automaker, is to produce 10 million cars a year. If you're not doing that, it's very difficult. Also, you need to produce a lot of different models all on one platform. That is a very hard thing for a new company coming in to do. So, it had a lot to do with access to capital and manufacturing scale. Manufacturing scale is so important.
The strange thing that's happening now is, we have Tesla, that may or may not become a major company. Now, there have been small companies started. Koenigsegg is one of my favorites, a $3 million car. So, you can start a car company, but you can't start a mainstream, mass-producing car company, or so it would seem. Tesla has been able to access billions and billions in capital from people who desire to sign onto the dream and the hope that this company's going to really change the world and is going to build a great car. And by all accounts, they do build a great car. They don't yet make money. It remains to be seen whether they will or whether they will go from being what is really a niche company to a mainstream automaker. And we don't know.
Sciple: Part of that, when it comes to the emergence of these new companies -- you have Tesla, Riviana is another one -- is the idea that the automotive industry is being reshaped by this transition to electric vehicles. We talked about earlier about The Electric Vehicle company. Electric vehicles have been around since before the beginning of the 20th century. With EVs emerging onto the market, do you see this as the start of a meaningful shift in the automotive industry, away from the internal combustion engine toward a 100% EV future long-term? Why or why not?
Albert: I certainly do. I don't know 100%, 95%, whatever it is. Two things to keep in mind. These things take time. If we're just going to do it on a market-based situation, even with a benefit for the purchase, we sell about 17 million cars a year. There are 240 million cars in the country. About 20% of vehicles are over 18 years old. So, for the entire fleet of automobiles to turn over, to become new, that has been growing and growing. We're now up to the average car being 12 years old.
That said, certainly, governments outside of the United States are pushing hard for EVs. And then, as that happens, the market does change. In fact, it goes together with driverless cars. EVs are less complicated, more reliable. You have to sort out a lot of things with the batteries, but in terms of an electric motor, it'll run forever. Once the vehicle becomes something other than a consumer product -- a chrome-covered Buick -- once it becomes something that, I don't know, I might care what color Uber I get into, but that's about it, right; then, by all means, electricity makes more sense.
Sciple: As we see the role of the car change, and folks continue to push back getting their driver's license, that's kind of a secular sacrament, if you want to put it that way, the rite of passage folks have, getting your first car, graduating from high school -- as autonomy comes to the fore, and our role as drivers shifts, what do we lose as a society as we get rid of that part of being an American?
Albert: Yeah, of being an American, I think, is very important. I'll take those two elements separately. In terms of being an American, we've seen General Motors go from the biggest car company in the world and the most profitable to bankrupt. That really does change our relationship with the automobile in terms of American pride. But also, the top three selling vehicles in the United States are pickup trucks. Ford has the No. 1, GM, and then Fiat Chrysler. That tells me that people still very much care about a vehicle that is uniquely American. There is nowhere else in the world where a large country is buying more pickups than sedans. It's a ridiculous vehicle. I just watched Jim Gaffigan. These pickups drive around with nothing in the trunk, nothing in the bed. The beds are pristine, and he said it's like carrying around an empty suitcase, because an empty suitcase doesn't say, "I'm going somewhere," it says, "I'm the kind of guy who could go somewhere." That is very much signaling that.
Another bit of information is that there's been this thing where pick-up trucks go and pull Teslas away from the Superchargers and parking spaces. It's like many other elements of life today. "Real Americans drive pick-up trucks. If you're driving a Tesla, you're the enemy." That still goes on, in terms of being an American.
The other element of that, in terms of getting your license later, and what you lose when you stop driving, to me, the most interesting thing about that is, we live in a society -- and I watch it with my kids -- with constant social media, which is really social marketing, isn't it? And, constant engagement with purchasing, and so forth. I always think, I have a thought, I pick up my phone, and the next thing I know, an Amazon box is there, right? It's so frictionless. Consumption is so frictionless now. It just happens almost as soon as you think about it. When you're in the car, certainly a car that's not self-driving, you're not able to do that. You're also not really able to work. Maybe you have the radio on, maybe you take a phone call, but you're not working. You're not consuming, you're not working. It's this interstitial space, it's a third place. And it's a job, driving, that occupies your mind. You have to pay attention to it. You can do other things, but it is, in a sense, a meditative state.
Now, could we replace that and not spew carbon in the air? Absolutely, and that would be great. But I do think it is one of the few places where that happens anymore. And all we're going to see with a driverless car is all of that social marketing, and all of that work and labor, invade the last refuge.
Sciple: Since we're an investing show, I've got to ask how you invest personally. Do you invest personally? What do you think about that?
Albert: There's a wonderful book called Narrative and Numbers. The best way to invest is to look at the story, look at the balance sheet, do your free cash flow analysis, and then try to put those together. You can look at Uber, and you can say, "Oh, they're a taxi company. OK. Let me run the numbers." Or, you can say, "They're a transportation network company, and they're going to take over the world," and you can run the numbers again. So you have to have both of those.
I am much better at the story. I have a financial advisor who's excellent and quick, and he runs the numbers. I'm not invested in Tesla. I kind of have to admit I'm a little pissed off because I got in on the IPO, $17 a share. It went to $35. My advisor guy said, "This is ridiculous. Let's sell it." And I'm like, "Yeah." So, now, where we've ended up has bothered me.
I invested in a company called NIO. I'm not recommending it. It was advertised as the Tesla of China. I did great for a while. It went from like $5 to $17. I was like, "This is great! It's going!" Now I think it's at $3. But, you invest a small piece of that. You enjoy it.
So, that's really what I do. I do the story. I have somebody else who's better with the numbers. And I tend to follow my gut on a lot of things. I followed my gut on Amazon. I'm no genius, though. The bottom line is, everything reverts to the mean.
Sciple: Last question before we go away. When you look at autonomy and transportation as an industry, it really seems to be evolving so quickly. What are you going to be paying most attention to in the next couple of years when it comes to evolving mobility? What will you be paying most close attention to and looking for?
Albert: Well, what I'd like to see is really a ground swell of support -- and I'm seeing it locally where I live -- for things like protected bike lanes, things like daylighting intersections so that pedestrians get a lot more privilege. Traffic engineers, planners, are very clear on that, and politically seem to be moving forward. So I am looking for more and more of that.
In terms of autonomy, we're starting to see the bloom go off the rose of autonomy, and that is partly because, I believe, the bloom's gone off the rose of Facebook and these others. I'm looking at how this conversation is going to change, and if it will. I'm a little cynical, so I worry we're going to keep going down the "Silicon Valley, we're here to save the world" route. But I am very hopeful that traffic calming, more bicyclers and all that, more mass transit if we can ever get around to it, will happen. That's what I'm looking at over the next few years.
Sciple: All right, Dan Albert, thanks so much for coming on the show with us! For folks that have been listening, it's Are We There Yet? The American Automobile Past, Present, and Driverless.
Albert: Thank you so much for reading it! And thank you for having me on!
Hill: That's it for this week's show! Our engineer's Austin Morgan, our producer's Mac Greer. I'm Chris Hill. Thanks for listening! We'll see you next week!
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Chris Hill owns shares of Amazon, Under Armour (A Shares), Under Armour (C Shares), and Walt Disney. Emily Flippen owns shares of Bilibili and iQiyi. Jason Moser owns shares of Amazon, Hasbro, Mastercard, Nike, Twitter, Under Armour (A Shares), Under Armour (C Shares), and Walt Disney. Nick Sciple owns shares of Mastercard and has the following options: long January 2020 $50 puts on Tesla, long January 2020 $100 puts on Tesla, long January 2021 $100 puts on Tesla, and long January 2021 $50 puts on Tesla. Ron Gross owns shares of Amazon, Baidu, Costco Wholesale, Mastercard, Nike, and Walt Disney. The Motley Fool owns shares of and recommends Amazon, American Tower, Baidu, Bilibili, Hasbro, Intuit, Mastercard, Netflix, Nike, Salesforce.com, Tesla, Twitter, Under Armour (A Shares), Under Armour (C Shares), and Walt Disney. The Motley Fool is short shares of Hasbro and has the following options: long January 2021 $60 calls on Walt Disney, short October 2019 $125 calls on Walt Disney, short January 2020 $180 calls on Costco Wholesale, long January 2020 $115 calls on Costco Wholesale, long January 2021 $100 calls on Salesforce.com, and long January 2021 $120 calls on Home Depot. The Motley Fool recommends Costco Wholesale, Home Depot, iQiyi, Lowe's, and Nordstrom. The Motley Fool has a disclosure policy.