In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Travis Hoium and Lou Whiteman are joined by Motley Fool analyst Emily Flippen to discuss:
- Anthropic’s $65 billion raise.
- Corporate America’s ROI on AI.
- What do consumers want?
- Our favorite investing quotes and books.
- Stocks on our radar.
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. When you’re ready to invest, check out this top 10 list of stocks to buy.
A full transcript is below.
This podcast was recorded on May 29, 2026.
Travis Hoium: Is AI rationality here? Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I’m Travis Hoium, joined today by Lou Whiteman and Emily Flippen. Guys, we can’t start the show without talking about some of the biggest deals that we have ever seen in private markets. We’re going to get to the rationality that may be here in artificial intelligence, but I want to start with Anthropic. They announced this week that they’re raising or they completed raising $65 billion, Emily, at a nearly $1 trillion valuation. It seems like Anthropic can do absolutely no wrong at this point.
Emily Flippen: In the Anthropic case, it feels like the only thing that’s stopping itself is maybe itself. Because, as you mentioned, that trillion-dollar valuation, near-trillion-dollar valuation, begs the question of how much profit are you projecting out over the next decade, over the next two decades, over the next 100 years to justify that? Ultimately, right now, all of this private market funding that’s flowing into Anthropic is justifying that valuation. But if and when that funding dries up, suddenly, Anthropic is going to be experiencing the pressure on itself to make its business profitable. I think that involves no longer subsidizing usage. Forcing enterprises to potentially pay more. When you start adding in the complications of that equation for companies, it does start to beg the question of what you mentioned, which is what does rational AI look like at an enterprise scale? But for now, that’s not really Anthropic’s problem because everyone’s giving the money hand over fist.
Travis Hoium: We’ll get to that rationality in a second. But Lou, I want to stick on this for a moment because the numbers have gotten so crazy. We talked earlier this week about the SpaceX IPO. They’re looking at potentially up to $2 trillion in valuation. You have OpenAI out there, now Anthropic. It is crazy the amount of money that is going into these still-private companies. They’re still not publicly traded.
Lou Whiteman: Crazy. Let’s be honest, nonsensical. Maybe it’ll work out, but I’m going to be the troll and play a game here. Anthropic is valued at about a trillion. SpaceX is at 2 trillion. SpaceX is more than AI. Grok is at least two times as good as Claude? What value is that? Obviously, these are different companies at different points in their lives, but all of the money in the world is being thrown at it now. It could all pay out. If they go to where they want to go, it’s all going to look really good long term. But for now, we’re in silly season, where money is flying out the door, and we’re trying to figure out what to do with it.
Travis Hoium: The other thing that they have coming, Anthropic specifically, is Mythos, the scary model that was going to destroy the world a few weeks ago, is apparently going public in the next week or two. We’ll see where that goes. Does that improve things even further? Because there was a step change in the quality of the model. It was late in 2025, early in 2026. This is supposed to be apparently another step change in improvement. We’ll definitely be following Anthropic because this is one of those companies that not only is a big player in AI, is getting its money from some of the biggest companies in the world, like Alphabet and Amazon, two of its biggest investors. I wanted to turn to the big topic of the week, which is potential rationality coming into the AI market, Emily. We’ve been dancing around this for a while, as we discussed the AI build-out and the 750 billion plus or minus a few hundred billion dollars that the big tech companies are going to put into this AI build out in 2026. How is that payoff going to happen? We talked last week about: Gemini is actually raising prices, which I think is interesting, maybe showing a little bit more rationality on that model-building side.
But now we’re hearing this week, the big topic was, some of the biggest AI consumers are starting to go, Wait a second, how much are we spending on AI? What is the payoff? There was comments from Uber’s COO. I think that was a little bit overblown, how much he was questioning the payoff. But we’ve seen Microsoft cancel a bunch of their Claude subscriptions. Everybody at least seems to be getting to that point where we go, ‘these spending numbers are getting really big.’ That’s what’s driving Anthropic growth. But is there a payoff for that spending? Is that good for this build-out long term?
Emily Flippen: It’s a double-edged sword because you use reducing Claude as an example. The reason why companies like Microsoft are telling their developers, Hey, let’s reduce the usage of Claude. It’s because they’re using it too much, and it’s really interesting to have this value proposition that is a very potentially expensive. Like I mentioned really subsidized right now, a tool that is incredibly powerful and incredibly useful for enterprises that is fighting against the fact that so many people want and need access to these tools. In my opinion, I don’t really think that we’ve seen any indication so far that poor return on investment is threatening the build-out. A lot of the investments we’re still seeing, even at the company level, are still being navigated towards AI, and it doesn’t mean that that equation shouldn’t be happening. It’s that it’s not changing anything for the reality of companies like hyperscalers that are investing the most right now.
For the most part, it’s like every company is pushing right now to automate everything that they can. I do think to your point that’s maybe not sustainable over the long-term, to the extent that prices keep getting raised for AI access, which it seems like it’s going to need to do at some point, when the private market funding dries up and these companies are public and they’re suddenly trying to justify their valuations by generating profits, you raise the cost, and then the rationality has to come to enterprises. But I don’t actually think we’re seeing any of that rationality happening today yet. In fact, a lot of what we’re seeing is still like, Hey, use the tool, use these tools, but use our tools, too. When you look at that, and you compare that to companies that have reported earnings, the adoption and usage of AI-based tooling is exponentially growing. I think the rationality comes when you start to see companies reducing their usage, and that’s simply not happening yet.
Travis Hoium: Lou, token maxing is a catchy thing, but ROImaxxing maybe isn’t quite so catchy if you’re in this AI build-up.
Lou Whiteman: This is what’s so hard about investing. Because I can look at this, and it looks clear to me as daylight, that this is not sustainable, that something has to break here. But I have no idea when that’s going to be. Like Emily was saying, I don’t necessarily think it’s anytime soon. But look at the public companies. Alphabet, through the course of its lifetime, has prided itself on generating mid-teens return on invested capital in their businesses. I.e., they’re not doing that with AI right now. We are hearing people complain about how expensive it is, so something has to give. Hyperscalers are going to have to generate more revenue to get those returns up because the costs are massive.
Travis Hoium: We’re starting to see that on the model side. The costs are going up, so it seems like we’re at least moving in that direction.
Lou Whiteman: There’s yada yada yada Moore’s law, things get less expensive over time, and we learn to be more efficient. That could be part of it. But this whole thing, I don’t know how to close that circle. They aren’t making enough right now to justify their investment. There’s already pushback on what AI spending could be. Maybe it’s the SaaS-apocalypse, where it’s the only thing people spend on. I don’t know where it’s going to break. I don’t know when it’s going to break, but it feels like the status quo can’t go on forever. That’s terrifying for me as an investor, ’cause two out of three things could do fine, and I don’t want to sell everything and put it under the mattress. But somewhere in the supply chain, this continuum, I don’t think we can go on like this indefinitely.
Travis Hoium: Lou, I want to push on that a little bit with some of the stocks that have done really well in the market. Some of the reasons that some of these costs from the model side and from the hyperscaler side are starting to go up. Their costs are going up. If you look at a stock like Micron, maybe one of the most talked about on the market right now, or the equipment companies. They’re doing so well because there’s so much demand, and what they’ve done is say, Hey, we got a ton of demand. We’re going to raise our prices. But that means that the ROI for all of these developments go down unless you also raise your prices. At the same time, it seems like what we’re learning from a lot of these models is they’re getting smarter, but they’re also consuming more tokens. We’ve lived in a world over the last 40 or 50 years where technology gets cheaper and better at the same time. Both of those things happen. It seems like the almost paradox in AI today is that it’s getting better, but it’s getting more expensive.
Emily Flippen: I think this is really interesting because there is an expectation that’s being priced into the market right now that, at scale, AI is going to get cheaper. Sure, we might see higher prices in the interim. But as the infrastructure build-out matures, we’re eventually going to get to the point where we start to recoup a lot of the initial investments. We saw this build-out happen with the Claude, for instance. Amazon got a lot of flak for the billions of dollars they spent in building out the Cloud, and now we’re reaping all the benefits of it with AWS. But I think one of the more complicated aspects of AI is, you’re begging the question, when is enough enough? You mentioned Mythos as a good example. It’s this long-awaited model. It’s the best of the best. Is it forever going to be the best of the best, or is Anthropic going to have to continue to redevelop into AI training and reinvest into AI training to make the next best model to continue to compete with the competition? To the extent that they’re still spending tons and tons of money on model training, as opposed to agentic usage, that still ends up being incredibly expensive. We might not actually see the flattening curve that so many investors expect.
Lou Whiteman: I think this is a good articulation of what I mean, where something has to break. I know that’s terrible language use. But so let’s say investors are right to bid up the suppliers and the picks and shovels and all of this because prices are going to hold. Then, investors are also bidding up the hyperscalars, saying that they’re going to turn this into a great profit center. There’s also this optimism in the user side that things are going to get more efficient, because AI is going to take over a lot of things that we’re doing other things. I don’t see how all three of those things can be true, that the suppliers sustain their revenue and margins. The hyperscalars, it turns out to be a good ROIC investment, and we see real economic savings or economic efficiency generated on the user side. It feels like there’s a tension there that has to resolve itself at some point.
Travis Hoium: If we want to use an analogy, smartphones have been incredibly profitable for Apple. But smartphones have not been particularly profitable for Apple’s suppliers. If you were betting on the iPhone being incredibly successful, and you said, but I don’t want to buy Apple. I’m going to buy its suppliers who are building screens or building lenses. There’s very few of those suppliers, and I invested in one back in the day that was doing, I think, some of the screens for cameras and also the watch that ended up going bankrupt. Because they push those suppliers so hard. Typically, what happens in these supply chains is somewhere in that supply chain, there’s a choke point. There’s a differentiation that really matters, and it can’t be everything. I think that’s what Lou is getting at, and that’s the trouble we have right now, as investors are figuring out what’s sustainable and what isn’t. When we come back, I do want to talk about what’s going on with AI on the consumer side because there’s a lot of changes coming. You’re listening to Motley Fool Hidden Gems Investing.
Welcome back to Motley Fool Hidden Gems Investing. Let’s turn this discussion to the consumer side of artificial intelligence. One of the things, Lou, that I thought was interesting this week was Meta is going to be starting to focus more on AI for enterprises. This is a company that has primarily been a consumer business; they have the advertising business, and that’s something that businesses have to deal with. But their other foray into this was in the world of VR, where they tried to make this workspace, I think is what it was called, a big thing, made productivity tools that they were going to actually sell to people. It almost seems like what they’re doing with AI, moving more to competing with Google, which is a little bit strange for a company that’s always been a consumer company.
Lou Whiteman: I brought up Willie Sutton the other day, and I’m going to go back to it today. Why are they going to the enterprise? Because that’s where the money is. It’s the same reason that Willie Sutton. I am a Meta consumer, and I have seen with some amusement their attempts to try to add their AI to my feed, like it’ll be some random school saying, “Congratulations to so-and-so for winning a track meet.” The helpful prompts are “How long has so-and-so trained for this track meet?” “How many people have won this?” It’s trying to force this into my life and failing miserably. Emily and I can debate this. I’m not going to say consumers are anti-AI. But I don’t think consumers have found the same value in AI that businesses have. Businesses have a lot bigger checkbooks to deploy. I still don’t know what Meta really is going to do with all the trillions they’re going to spend on this. I wouldn’t want to have to be in charge of their monetization strategy versus some of their competitors, but if I was them, I’d be doing the same thing. I really criticized.
Travis Hoium: Emily, we talked about all the things that Anthropic is doing right. That is almost entirely based on the fact that they do coding really well with AI. It’s not that Anthropic is the absolute best chatbot for LLMs that you and I might use. I do use Claude, but most of their money is made with coding, and that is something that seems like everybody is chasing because that’s where OpenAI is going too.
Emily Flippen: Yes, and that’s why I find really frustrating about this whole conversation from the perspective of Meta. Is because I think Anthropic understands, for at least now, what AI does really, which is strict rules-based processing. Something like coding is direct. It’s rules-based. There’s very little room for nuance when it comes to something like developing code. It works, or it doesn’t work. Throughout the majority of human life, there’s a lot of nuance and everything else. There’s human creativity, there’s perspectives, there’s analysis, and that tends to be highly subjective versus the objective reality that is coding. Anthropic is right, and they’re well-positioned to focus on the enterprise, to focus on the objective versus the subjective. But Meta lacks the self-awareness that is needed to understand what it does, which is much more subjective versus objective. I really hate the way that this company has continued to allocate capital. I think Meta has done well in spite of its leadership team and their capital allocation decisions, not because of it, because they have this amazing base. They’re an ad-based business when push comes to shove. What they should be doing is catalyzing and using AI to try something like engagement to make their ads better. They don’t need to try to compete with Anthropic. They don’t even need to try to compete with OpenAI and ChatGPT. All they need to do is adopt the technology as it comes to them, but we see management continue to try to keep up with companies that are radically different things than what they’re trying to do. As an investor, I find myself wanting to pull my hair out at looking at their decisions. But I think Meta will probably do well in spite of it all.
Travis Hoium: It does seem like a case where Mark Zuckerberg has always had this complex where he wants the business to be something that it’s not. Sheryl Sandberg, I would argue, was probably the most important person in the history of Meta Platforms or Facebook, if we can now please go back to that. Because she actually built the ad business, made that a real thing, made that the driver of the business, so that all these other side projects could happen. Even the way that Zuckerberg has often talked about connecting people. That’s not really what Instagram and Facebook does at this point. If anything, the studies show the opposite happens. It does seem like this strange place, Emily, where he’s trying to build this vision of the future that he thinks the world wants, and what the world really wants is some mindless content and maybe some good ads in your Instagram feed, so I know where to get my next belt or pair of socks.
Emily Flippen: Yes, exactly. Hilariously enough, AI actually does mindless content pretty well. All of this should be acting as a massive tailwind to Meta. But what I will say is I actually think that some of the best when it comes to AI, maybe, is still in front of businesses like Meta. We spend so much time talking on the enterprise side because that’s where people are willing to spend the money, but I don’t think it’s a done deal that more useful for enterprises than it is for individuals. I think individuals are being so heavily subsidized right now that they don’t need to pay for AI. I think if all of our large language models got together and said, “We’re no longer going to be offering AI services for free, we’re going to start charging for it.” A lot of individual consumers be willing to pay a low monthly fee to access something like ChatGPT, to access Claude, to access other bots beyond the way that they’re available for free today. I think that’s maybe being undervalued here a bit in the years to come, we’ll probably see more of a push for that.
Travis Hoium: Emily, if you have to pay for your chatbot, how much are you paying a month?
Emily Flippen: Certainly not $20. No offense, OpenAI. But half of that, I think, is fair. Give me enough of a resource that I can quickly find a recipe when I need it, when I can quickly ask a question and get voice response, that thing. The basic response is, I think this service does well with individual consumers, and some people will pay for that. More people are paying for it today.
Lou Whiteman: $20, 300 million Americans. I know it’s not Americans, but that’s only $72 billion a year. Where are we going to cover our costs? Yikes.
Travis Hoium: It will be very interesting to see how the enterprise and the consumer side differentiate because I think that is really happening in this business right now. When we come back, we’re going to get some favorite quotes from Emily and Lou. You’re listening in Motley Fool Hidden Gems Investing.
Welcome back to Motley Fool Hidden Gems Investing. In this section, we like to have a little bit of fun with investing. This week, I wanted to get some background, some stories from Lou and Emily. Let’s start with this, Lou. I want to know what your favorite investing quote is.
Lou Whiteman: It’s hard to just pick one. I hate going with Warren Buffett because everyone goes with Warren Buffett, but I do think that this is just such a gory quote. The stock market is a device to transfer money from the impatient to the patient. I like holding long term; I like thinking years, and this really resonates with me. The whole idea of a hidden gem in my head is that just the market is missing something right now, and they’ll figure it out eventually, and I’m going to buy it now and have it. I always really like that.
Travis Hoium: It is wild to think about all the things that we knew, and the market wasn’t pricing in appropriately. Streaming is the future. Like, of course, it was. We knew that 15 years ago, and yet it took a long time for the market to realize that Netflix and all these other companies were going to be dominating streaming. There’s a lot of different examples like that. I love that.
Lou Whiteman: I’ll go a step further, too. Like, if you watch every night, they tell you why the stocks went up or down and whether or not that’s right or not, but almost always, it’s something we already knew. Mostly every now and then, there’s a shock to the system, but mostly it’s just we collectively decide to care about something we already knew. That’s when stocks move.
Travis Hoium: Emily?
Emily Flippen: I’m sure this is attributable to a famous investor I’m since forgetting, but I’m going to attribute it to my former colleague here, Jim Muller, who told me this quote on my first day at The Motley Fool, and he said, Pessimists sound smart, but optimists make more money. Again, I know this is attributable to somebody else, but I really took it to heart because, if anybody who’s listening to me on a podcast probably knows, I am maybe the biggest pessimist that has existed. If there is a side of an argument that I can take, I will take the other side of the argument just for the sake of having a fight. You do sound so smart whenever you look down on whatever it is that people are excited about. I had this very long conversation around AI. I’m obviously sounding very pessimistic around it. Look at what’s kept the market performing so well throughout the course of not just 2026, but over the past few years. If you were a pessimist when it comes to your investments and never invested in any AI-related company, you would be losing money today versus the broader market. It’s great to have the perspective and the awareness that not everything is hunky-dory all the time, but I do not manage my portfolio in a pessimistic manner. My portfolio sounds and looks very different than I do on a podcast, and I’m preparing myself for the worst because my portfolio is heavily invested in the market and growth-oriented investments for the long term.
Travis Hoium: To even take that to the next level is, I almost think that the best investors sound crazy because they’re investing in these things. Like, you listen to venture capitalists, and they’re explaining this world that doesn’t exist, and you’re like, That sounds nuts. Even if they’re wrong, it’s like what I shoot for the moon, but if I miss, I hit the stars thing. It’s having that level of optimism or forcing that into yourself. This is one of the reasons I invest every single month because it forces me to go, What do I like? Rather than saying, What don’t I like each month?. I think there is something just broadly to learn there, whether it’s optimism, whether it’s craziness, some of those things are going to be the best tools that you can have as an investor. I do want to add one here. I think this came from Munger. Show me the incentives. I’ll show you the outcome. I think there are so many things in the world that you can apply this to. Think about this when you’re hearing quotes from executives, when you’re hearing quotes from people about AI. What are their incentives? It’ll help you put context to how to interpret that. One of the things we like to talk about is books. Emily, what is your favorite investing book?
Emily Flippen: This might come as a bit of a surprise, and I will say it’s not necessarily my favorite from the perspective of how it’s written or the size of it. But it’s a little book that beat the market by Joel Greenblatt. The reason why it’s my favorite is because, A, it was one of the first investing books I ever read, but, B, I think it provides probably the most critical lesson to new investors. It’s around the mentality of long-term investing. The book itself purports to found the magic formula, so to speak, to beating the markets. The formula doesn’t naturally work anymore, so ignore that aspect of it, in my opinion. But the most important thing to take away from this book, if you do choose to read it, is the fact that Greenblatt ran a fund based off of this formula for a number of years under the expectation that it would drive market-beating results, had done the back testing, done the logic, and said, This is our magic formula. This is our strategy for beating the markets. After I can’t remember exactly how long it was, a number of years of underperformance, the fund was actually closed and was given over to somebody who actually kept that same mentality, that same magic formula, so to speak, that then, of course, went on to beat the market. This is the takeaway, which is, don’t be so short-termist in your strategy and your goals that you lose sight of the bigger picture. It’s the most critical thing for long-term investors. The best advantage that we as individual retail investors have is our long-term focus, the inability, or I should say, the lack of responsibility to report something like quarterly metrics to investors who are going to take their capital away on short notice. We are the owners of our own capital, and we can take that long-term mindset, and I think this book communicates that so well.
Lou Whiteman: I went back to the ’90s. I’ve always liked stories over textbooks. I’d much rather hear a story to learn than just have to memorize facts. Roger Lowenstein is the best financial writer of my generation, I think. One of his books, When Genius Failed, which is the story of the rise and fall of Long-Term Capital Management, the original quant fund. This was the crash before the dot-com crash. All of these smart academics came together, figured out how to break the market or to outsmart the market, and it failed spectacularly. I learned so much about just how Wall Street works, how investing works from reading this book, and we’ll get to this. It’s a theme with me. I don’t know. But I think everyone’s first crash is hopefully when the hubris is sucked out of you and just seeing the way ego or seeing the way that that got in the way of this. I just think it’s a fascinating story about, I guess back to mindset, just like Emily said, about how mindset can go terribly wrong.
Travis Hoium: I want to give a quick shout-out to the book Built to Last because I think that compares a whole series of comparing two different companies and why one company succeeded and another company failed. Really fascinating business lessons. But if you haven’t read Confessions of a Wall Street Addict, which is by Jim Cramer, this is not a book that I learned anything about investing and which stocks to buy, but rather how the market works. I think that underbelly is just fascinating to learn about because it does allow you to take a step back and go, This is what’s happening over the past hour or the past week. Is that crazy? You can go, yeah, it is because the day-to-day of the market is absolutely crazy. There were stories of him or his colleagues cornering CFOs in hotel lobbies so that they could try to suss out, Are you going to beat your numbers or not? Calling analysts, trying to figure out, are you going to upgrade or downgrade a stock? That was how things worked in the ’80s and ’90s. There are different things today; there’s quantitative trading, algorithmic trading, and all kinds of stuff. But once you start to understand that underbelly of the market, I think it is a little bit easier to be a long-term investor, which is our theme here. The takeaway is thinking about 10 years is much wiser than thinking about the next 10 minutes. I wanted to give you a little bit of an opportunity to tell us some stories about the market. Lou, what is the most interesting thing someone in the industry has told or taught you about the market?
Lou Whiteman: I’m going to stay on a theme here. Back to your first toe stubbing is the one that hopefully teaches you a lesson. Back in the ’90s, I was working for more an institutional, and it was a stock called eToys that was now just the quintessential dot-com bust stock. They peaked, I want to say, in October of 1999, and they were $80-something per share. The writing was on the wall going into the next year, but we were smarter than everybody else. We knew eToys was a terrible business. But we also knew that eToys was going to put out a ton of press releases as we approached the holiday season, and all of these silly investors who are stupider than us were going to buy up the shares on those press releases, and we were going to get in, make a fortune, and get out. I believe that by December of 2020, eToys was at a buck. The lesson there is that in my career, I found the times I feel like I’m the most clever are usually the times that I’m making the stupidest mistakes. I think you have to learn that the hard way. I like to think I wouldn’t do this if I didn’t have some advantages, and I do think I’m capable of beating the conventional wisdom. That’s why I buy individual stocks. But at the end of the day, I’m not nearly as smart as I want to think I am, and I think that’s probably true of most of us.
Travis Hoium: Emily?
Emily Flippen: It’s really hard to follow that up. But I’ll do my best here, and in order to do so, I’ll steal probably what I think is maybe one of the most interesting things that I’ve been told by somebody in the industry, and actually by Motley Fool co-founder David Gardner. This was, again, during my first week here at The Fool. We sat down; I believe we were playing Code Names together as a welcome-to-the-company activity. He said one of his favorite pieces of investing advice is to simply live a more interesting life. How old was I, like 23, 24-year-olds, who had just started my investing journey? That was a weird piece of unconventional wisdom that has stuck with me because I think the idea is you can really use the opportunity to expand your circle of competence to learn what you don’t know, to see things from a different perspective, because on every transaction you have in the market, there’s two sides. To lose points, we always think that we’re the smartest ones. We’re buying a stock when somebody else is selling it; we’re selling a stock when somebody else is buying. But the truth is, for every decision that you make, somebody out there who’s probably just as smart is making the opposite decision. The only way that you can get and expand, try new risk, get new perspectives is to go out there in the world and experience things beyond just your little narrow slice of life. For anybody who’s followed me on TV or otherwise, I know that I take that advice very much to heart, and I think it would make us all better investors to get those new perspectives.
Travis Hoium: I interned at a hedge fund in grad school, and to Lou’s point, I think it was Lou who said the real-life experience, the stories, is really where you learn. Spending three months with the people who are making markets every day or trying to find little tiny edges is fascinating. As my time there came to an end, the owner, who was very wealthy, had done extremely well investing, had been in the hedge fund world for, I don’t know, 30 years or so at that point, said, Eventually, we all blow up. The trick is to make it as long as possible. It was so fascinating to hear this fragility of people in that industry. I am completely the opposite investor. We were looking for things that were going to make money tomorrow or the next day, or making markets is having your computer closest to the exchange. Those were the things that we were doing at that fund, so it was fascinating to learn about that. But to have the acknowledgment that, hey, eventually, I’m going to be wrong, and I’m going to be really wrong, and this is all going to go belly up, it’s a very different corner of the market than I’m used to now. But again, being aware of those things is a good thing to learn about. I want to give a quick moment for some maybe Hidden Gems and some stock talk as we end this segment. I want to do this in honor of Ferrari, who took a big swing with the Luce this week, getting panned online. But I don’t know; I think it’s probably going to do okay. If you’re taking a big swing on investments over the next, let’s say, 20 years or so, Emily, where are there some hidden gems for you?
Emily Flippen: This company, old Hidden Gems recommendation, but one that I think is the definition of big swings, and that’s TransMedics ticker’s TMDX. With all these big swings, I will say different to Ferrari necessarily. This is a very risky investment. If somebody chooses to dip their toes in, I really encourage them to do some additional due diligence. But I like what the company is trying to do, which is moving into healthcare logistics. They’ve built a platform that is to keep organ donors or donor organs, I should say, alive and functioning outside of the body for as long as possible during transport. They’re in the process of trying to vertically integrate that entire organ transplant supply chain. This is obviously for anybody who’s been through the healthcare system, especially here in the United States, a massive opportunity because of the need associated with organ transplants. It’s a company that is the definition of volatile, so, like I said, tread carefully. But if they’re able to crack the code here for organ transplants and manage to keep them alive, then that is just, yeah, it’s a game changer for people’s lives and hopefully investors.
Travis Hoium: Along the lines of Intuitive Surgical, who is probably one of the Motley Fool’s most successful picks long term. Lou?
Lou Whiteman: Like Emily said, almost by definition, big swings, 100X, whatever, you’re taking on a ton of risk, and I’ve said it three times, but I need to say it too. Caveat, caveat, caveat, we’re not saying that there’s no risk here. But look, if you want to look at that category, space for me is that category all the way across the board. I don’t know what becomes of it. Right now, we’re in this process where everything’s about to get really a lot more affordable, and we’re going to figure out what really smart people can do with it. I don’t know how it plays out, but I do think that there’s going to be some crazy, good investments there. If you really want to stock in the biggest long shot, I think I’m just going for bust here. Little Company just went public; Merlin Autonomous Flying is what they’re trying to do. I don’t think in my lifetime I’m ever going to get on a Delta jet that doesn’t have a pilot. But Travis, the world needs 600,000 more pilots than we have over the next 25 years. If you can get this tech good enough that we could just reduce the numbers in the cockpit in half or something like that, that is going to be a massive success. The issue is it’s autonomous flying, so, God help us if we ever get there. We’ll see.
Travis Hoium: I don’t know about the 100X expectation in space, Lou. I’ve been following space for six months, and what I have learned is that these stocks go up 10X every.
Lou Whiteman: I was going to say, we’re already 100X.
Travis Hoium: When we come back, we are going to get to the stocks on our radar. You’re listening to Motley Fool Hidden Gems Investing. As always, people on the program may have an 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. All 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.
We like to end the show with the stocks on our radar. Emily, you’re up first. What are you looking at this week?
Emily Flippen: I’m looking at FedEx Freight. The ticker, once it goes public and listed on June 1st, will be FDXF. But this is actually a spin-off from FedEx. Once they complete this spin-off, it should be the largest LTL that’s less than truckload carrier in North America by revenue, just under $9 billion in sales with a really strong operating ratio just above 84%. That’s not an Old Dominion Freight Line level of good, but it is much better than their competitors. While the spin-off here will saddle the company with a lot of debt, they’re making a big payout to FedEx. I do think this is probably spinning off the better part of FedEx’s business. Something that I think all investors, maybe you, should just keep an eye on over the course of the next coming quarters.
Travis Hoium: Dan Boyd, behind the glass, are you interested in the good FedEx?
Dan Boyd: It’s hard to argue with FedEx in general, y’all, because, like, I’m pretty sure, judging by my emails today, that I’m going to have a FedEx driver visiting my house at some point today. They’re everywhere, a ubiquitous company.
Travis Hoium: I think I am as well. I’m getting the same emails, where maybe we’re on the same email chain. Lou, what are you looking at this week?
Lou Whiteman: Dan, I’m looking at Astronics, ticker ATRO, and Astronics is an aerospace electronic supplier. It sounds boring, but let me tell you what they really do. They make those in-flight entertainment systems that keep your kid occupied on a plane and keep all the other kids occupied. We love this company right there. They also have a defense business. When we considered this company for our national security portfolio last December, what we said was Astronics was at an inflection point, with both their commercial and defense businesses having the ability to really interesting growth opportunities up ahead. This week we saw some of that play out. The company announced it had received a purchase order from the U.S. Army for radio systems. For now, it’s only 44 million. It’s just a demo. But there are hundreds of millions more where that came from as it plays out. What this does is adds a lot of clarity about revenue in the years to come. Couple that with a still red-hot market for commercial travel and the premium airlines trying to differentiate themselves with electronics, with plugs in the seats, all of these fringe items, but things that this company’s great at. I think there’s room to fly here.
Travis Hoium: Dan, what do you think about the infotainment systems in aircraft?
Dan Boyd: Room to fly. Lou thinks he’s so funny.
Lou Whiteman: I do. I love myself, Dan. You know that.
Travis Hoium: It’s a little bit of whiplash here going from infotainment to military applications, but it definitely is an interesting stock. As somebody with two young children, I can’t understate the value of those things. What’s going on your watch list, FedEx Freight or Astronics? I’m actually very curious in both companies this week at Travis; it’s rare. Usually, our analysts give me a tip, especially when Emily shows up and says, Here’s a terrible company that you shouldn’t invest in. But it’s on my watchlist. No, actually I’m more interested in FedEx Freight. I like FedEx. Let’s go. It’ll be interesting to see how that one plays out because GE had some good spin-offs over the past couple of years. Thanks, everybody, for listening to this show. That’s all the time we have. We’ll see you here next time.
