In today's episode of MarketFoolery, Mac Greer talks with Million Dollar Portfolio's Jason Moser and Matt Argersinger about the market's biggest stories. Kodak (NYSE: KODK) is up crazy high after announcing its entrance into the crypto space, but this growth likely won't be maintained.
Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) seems to be laying the groundwork for Warren Buffett's eventual departure. Domino's (NYSE: DPZ) CEO Patrick Doyle is stepping down, leaving the market to wonder if a soon-to-be CEO-free Mexican grill with integrity might be his next venture. Also, Facebook (NASDAQ: FB) is rumored to be entering the smart-home market this year, with a potential offering that has us scratching our heads.
A full transcript follows the video.
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This video was recorded on Jan. 10, 2018.
Mac Greer: It's Wednesday, January 10th. Welcome to MarketFoolery! I'm Mac Greer, and joining me in studio, we have Matt Argersinger and Jason Moser from The Motley Fool's Million Dollar Portfolio. Gentlemen, welcome!
Jason Moser: Hey!
Matt Argersinger: Hello! Can I just say that I love when you say Million Dollar Portfolio? When you say it, it just has such authority.
Greer: True or false: you say that to all the hosts?
Argersinger: No, I don't, Mac.
Greer: Is that true?
Argersinger: Let's not tell Chris, but I think you say it the best.
Greer: Your secret is safe with me.
Moser: The gauntlet has been thrown.
Greer: OK, guys, on today's show we're going to talk some Buffett, we're going to talk some pizza, and we're going to talk some Facebook. But we begin with our newest growth stock, 130-year-old Eastman Kodak. On Monday, shares of Kodak trading around $3. Today, guys, shares trading around $10. What happened in between? Crypto. Kodak says it has used blockchain technology to create a new digital photography platform called KODAKCoin, which Jason, is essentially a cryptocurrency for photographers. What do you think?
Moser: I think we could probably make a lot of jokes about this, but I'm going to start out with an actual thought regarding this. I think the question here is, how viable can the KODAKOne rights management platform be? Because, that's why this currency exists. At least, it's one of the main reasons it exists. Kodak intents to build this KODAKOne rights management platform so that people in the business can manage the buying and selling of these digital properties more effectively. And KODAKCoin is the token, the currency that will be used on this platform in order to buy and sell rights.
Greer: So, you can register your work, you can license your work. That's a big deal for photographers. There's utility here.
Moser: That is a big deal. I'm certainly not making light of that. There is a utility there. Now, there are other businesses out here that do this kind of stuff. Shutterstock (NYSE: SSTK) is one that comes to mind. I believe, if I'm not mistaken, that Facebook has dipped a toe in the water trying to figure out ways, because of the fact that they generate so much content, particularly when you look at something like Instagram, which is so visually based anyway. So, I think there's a reason for this KODAKOne rights management platform. I very much question the need for an actual Kodak currency. I think that's a way to get their name out there. Certainly there's a marketing dynamic, certainly there's a sense of opportunism here and that they've seen other companies use this terminology and see a little bit of a boost in the stock market. Who knows how this ends up working out. I don't know that we would call Kodak the healthiest company in the world today. But, nevertheless, it's in the headlines for this move.
Greer: Matt, this is a company that, over the last few years, has pretty much been given up for dead. And now, in three days, we see the stock move from $3 to $10.
Argersinger: Honestly, I kind of stopped paying attention to these moves when the Long Island Iced Tea Company changed its name to Long Blockchain and went up 300%.
Greer: So, you're skeptical. You don't think they can make that move.
Argersinger: No, I think Jason made a good point. There does appear to be, in Kodak's case, at least, some utility to it. But I think it's a marketing move, I think it's a way for Kodak to attract new people into whatever ecosystem they may have these days, which I don't think is very large. So, for them it might be, as Jason said, opportunistic. Long-term, I don't know why the stock is up this much, it doesn't make sense to me.
Moser: It's not like Kodak is the only company that's ever tried this. There's all sorts of companies out there doing it. Facebook has its own currency, I think you can still buy gift cards in the store. The one that seems a little bit more relevant to me, at least, Amazon (NASDAQ: AMZN) has Amazon coins, and you get those coins, you can either buy them with cash or get coins when you purchase certain things, and then you can use those coins to purchase apps or content within the Amazon universe. So, there is something there that keeps you on the hook in that ecosystem. But, that's Amazon, or that's Facebook. I'm not sure that Kodak is ever going to be able to claim an ecosystem. Again, I think that's where the biggest question comes here -- is this KODAKOne rights management platform really a thing, what kind of a future could it really hold? If you can make some judgments there, you can at least get an idea as to whether this Kodak currency even makes sense to begin with, but I don't think it does, at the end of the day.
Greer: So, in terms of the stock, when you look at the stock today as opposed to last week, is it more interesting? Is it less interesting?
Moser: I mean, it's more interesting as a short. We've seen the stock with such a pop, so I think it's more interesting as a short. But I think this is still the same crappy business that it was yesterday.
Argersinger: Yeah, I totally agree. Nothing to add there.
Greer: OK, let's move on to a not crappy business called Berkshire Hathaway. Warren Buffett's succession plan is starting to take shape. On Wednesday, Berkshire named Gregory Abel and Ajit Jain as vice chairman. So, they're getting a bit of a promotion. But the real takeaway here is, that pretty much confirms what we already knew, that one of those two will probably succeed Warren Buffett.
Argersinger: That's right, Mac. Several years ago, Buffett made the move to ensure that the investing side of Berkshire Hathaway would have a plan, and he did that through the two hires previous there. This is shoring up the operating side of Berkshire Hathaway. Now, you have Greg Abel, who's going to oversee the non-insurance side of the business. You have Ajit Jain, who for decades has run most of Berkshire's insurance business, and now he's going to be overseeing that, which is the other vital part of Berkshire Hathaway. I'd have to say that Greg Abel, because he's 55, is probably the guy. I think, looking at Buffett, yes, he's on the brink of 90 years old, but I think everyone sitting here would be surprised if Buffett wasn't still CEO and chairman in five years from now. At that point, that's probably when something might happen. So, Greg Abel would still be a relatively young manager to take over that position. Far more interesting to me, though, was actually, the succession plans are important if you're a Berkshire shareholder, but I thought it was more interesting to see what Buffett and vice chairman Munger had to say about the stock market and cryptocurrency. We can talk about that. The idea that Buffett doesn't actually think the stock market, even though we've had this historic rally, and by most measures, the stock market is at a high valuation, he doesn't think it's that stretched when you factor in the prevailing level of interest rates, which are still very low and probably going to stay low, and the fact that we had this tremendous corporate tax cut. He doesn't think that's actually factored into the market. So, in a way, he was almost, this morning on CNBC, saying, "The stock market could actually be a little undervalued," which I thought was a pretty surprising statement.
Greer: The word he used there, Matt, he called the market sensible. And that really struck me. I was driving in, and I was like wow, you don't hear that word applied to this market very much.
Argersinger: Right. From Buffet, that's almost a buy signal.
Moser: He's walking the fence, isn't he? I think that's what Buffett has always been so good at doing. He's great at not really going to the extreme on either side of the coin. He's talking about cryptocurrency, for example, and how he wouldn't short, but he would certainly buy a put. He's talking about the market being sensible but not crazy cheap. He's always really good at communicating a level-headedness. And I think that's one of the reasons why we appreciate him so much, because of that long-term mentality. You can take that level-headed approach to a lot of the things we're talking about every day.
Greer: Going back to that CNBC interview, I took down a few notes that I wanted to share, because it's such a great interview. If you get a chance, Becky Quick's interview with Warren Buffett and Charlie Munger today on CNBC, definitely worth watching. When Buffett was asked why he didn't make this announcement earlier, he said, "Lethargy bordering on sloth." This from a guy who still works on Saturday. I think Buffett's idea of slothfulness is a little different from mine. Then, on his health -- Matty, we talked about this earlier -- he said, "I'm in remarkably good health considering the life I've led," and he went on to say, "I wasn't much to start with."
Moser: He's a humble guy.
Greer: He's incredibly humble. And we love that. Do you know who another humble guy is? Domino's CEO Patrick Doyle. How's that for a segue? Patrick Doyle announcing that he's stepping down in June. He started in 2010. If you go back in the way back machine, Domino's trading up around $9 a share in January of 2010. Not doing well, right? Doyle takes over, shares today trading north of $200. He's 54 years old, and a lot of people say this guy could be the next CEO of Chipotle (NYSE: CMG).
Moser: That's distinctly possible. It's funny, I remember going back to 1990, I graduated high school in 1991, so I remember in '88-90, going to football games at our school, and Domino's was the big kid on the block. They were just coming out there with a delivery model, and it redefined getting food and convenience. Having pizza delivered was kind of a big deal back then. And it still wasn't the greatest pizza back then. So then, it seemed to fall off a cliff. And you need to get a guy like Doyle in there to really recognize the challenges, and understand that even bad pizza is still pizza, but let's make some really good pizza here, and I think that's what he recognizes. So, when he's leaving, he said he basically wanted to hit on three major goals -- he said he wanted Domino's to be the top pizza company in the world, he wanted his franchisees to make more money, and he wanted to be able to refine his leadership team and have a sensible succession to allow the company to succeed after he was gone. He feels like he's met those three goals. And he's at a relatively young age still, it seems like he enjoyed his job, he was very good at it, I can see why he would be kicked around as a new possible CEO for Chipotle. And really, we haven't heard anything about that Chipotle story, so who knows what's going to happen with that company. If you remember my reckless prediction, Mac, Chipotle might very well go back to a private setting, because it's a little easier to manage the business when you're out of the public spotlight.
Greer: As a Chipotle shareholder, I would love to see Patrick Doyle take over, Matt, in part because when he took over at Domino's, one of the things they did with their ad campaign is, they showed focus groups where people consistently said, "This pizza tastes like cardboard." And Doyle said, "We hear you. That's not acceptable. We're going to fix it." And when you start from that position of humility, it's hard not to root for a guy like that.
Argersinger: Was it corrugated cardboard? I think he could be a good choice. The thing with Chipotle, though -- and I didn't follow the Domino's story early on enough, but I have a feeling that Domino's was pretty broken at the time. I wouldn't call Chipotle necessarily broken. I just think it needs someone -- and Doyle might be the right guy -- to do some basic blocking and tackling. Get control of the supply chain, roll out breakfast, do some clever marketing, bring traffic back. And whether that's Doyle or another CEO, I really don't know if you need someone as high profile as Doyle or maybe Steve Easterbrook to come in there and do it. I think you could get the COO, or even a good regional manager of a major chain, to come in, and work with Steve Ells and make this happen. So, it could happen. The timing is interesting, the fact that Chipotle is looking for someone and he steps away from Domino's, and I see Chipotle's stock up lately and that could be because of rumors of that. But I don't think they necessarily need that. I think it's more of just, someone to come in who's a competent manager, and make a few things happen.
Greer: What about Nick Saban at Chipotle?
Argersinger: Look, Nick Saban can run anything you want. Any company in the world would be a super success.
Greer: OK, guys, let's end with some Facebook buzz. I don't want to call this news yet, because it's a report according to Cheddar. And Jason, Cheddar is what?
Moser: Cheddar is the online news network, essentially. It's kind of like CNBC for millennials.
Greer: That's right. It's not just cheese. According to Cheddar, Facebook is getting into the home device market with a video chat device named Portal. The announcement will be in May, with the aim of shipping the device in the second half of 2018. Cheddar reporting that the price tag will be around $499. Jason, what do you think? Facebook?
Moser: If this is in fact the case, if it's possible for something to have a less than 0% chance of succeeding, I would say the Facebook Portal is probably it.
Greer: Why do you say that?
Moser: I can't fathom this thing get any traction whatsoever for a number of reasons. Let's just think about what this is. From the very get-go, they're talking about a video hub where you can communicate with your family and your friends. We've all already got one of those, Mac, in your pocket, and you can take them wherever you want to go. I don't know how much time people are spending in their kitchens anyway. And in all honesty, let's think about the companies that have already made so many advancements in this space already. Amazon developing the Echo, in hindsight, looks like such a smart bet given where that product is today, and given the iterations we've seen with that product. And the Echo Show is now exception. This basically sounds like Facebook's version of the Echo Show. And that's fine. The Echo Show is really cool. It's also about half as much as this Facebook portal, if that in fact is going to be the selling price there. And I'll bet you the Amazon Echo does more, and the technology is better. Now, with that said, I think this thing could totally flop and it's not going to matter. This is something that Facebook is not known for doing. Hardware is not their forte. But, I think Zuckerberg probably sees himself as that Bezos style long-term thinker. It's a simple bet for him to make. There's probably no downside, because I can't imagine anybody with a head on their shoulders thinks this thing is going to succeed, anyway.
Greer: I don't want to put words in your mouth, but you seem skeptical.
Moser: Just slightly. Just slightly skeptical. Hey, I could be wrong. I could certainly be wrong.
Greer: Matt, what do you think?
Argersinger: I can't disagree with Jason. I think the price tag, for one, as Jason mentioned, almost $500. More than twice the Amazon Echo, which just seems too big of a stretch given the lead that Amazon has. And I don't see a lot of consumers who have embraced the Echo are going to switch over and try the Portal when the Echo does all this and so much more. Remember, the great thing about the Echo is, for Amazon purposes, it's a way for consumers to buy more Amazon stuff, or use more Amazon services. With the way that Facebook is going to monetize this, they can't get it through the price, which is too expensive, is advertising. And again, whether or not that succeeds or not, I think Amazon at this point it's too far in the lead, and Facebook is too late to the game.
Greer: And don't you think we're approaching device fatigue? I don't know about you guys, but I feel like, I have an iPhone 6, and they give you the whole hocus pocus about how you're eligible for the upgrade now that you've had it for two years. I don't want to upgrade it.
Moser: I want a new battery.
Greer: Well, that's what I did. I went to the Apple Store, and I was like, I don't want to upgrade my phone, I just want a new battery, because my battery is totally shot. And that's what I'm doing, for $29. But I have device fatigue.
Moser: Yeah, I agree. I think we're hitting a point where there are so many devices out there, and it's all in the name of always being connected. And listen, I don't always want to be connected. That's why you'll never catch me with an Apple Watch. It's why I vow to never buy another iPad or tablet for as long as I live. The phone honestly really takes care of everything I need anyway. So, we have Echo, and we have a few Echo Dots around the house, and those are great, and we've certainly learned how to use them, and bring podcasts and radio and all sorts of things that it does. I feel like, at this point, you really have to make your case to convince the consumer to buy yet another device. And at $500, it just doesn't stand a chance. It doesn't stand a chance, because no one's going to look at shelling out that kind of money when you have better options out there between Amazon and Google, and Apple's HomePod is even cheaper than that. So, how Facebook figures they could command any pricing power is beyond me -- again, if this is in fact the case, and this is what's going to happen. I think they have the deck stacked against them.
Greer: OK, guys. As I love to do, it's the completely arbitrary desert island exit question. You have to buy one of these stocks, and you have to hold it for the next five years. We have Kodak, Berkshire, Domino's, and we have Facebook.
Argersinger: Oh my goodness!
Moser: So, Kodak, Berkshire, Domino's and Facebook?
Greer: Yeah, we're just wrapping it all up, and it's so unfair.
Moser: It's totally unfair.
Greer: Is it a slam dunk for Berkshire?
Moser: I'm absolutely going Berkshire 10 times.
Greer: OK, I thought you might surprise me.
Argersinger: I have to go Berkshire, too. No way.
Greer: What if I added "blockchain" to all the other names?
Moser: You case becomes more compelling, but I'm still sticking with Berkshire.
Argersinger: Me too.
Greer: Alright. Jason, Matt, thanks for joining me!
Argersinger: Thanks, Mac!
Moser: Thank you!
Greer: As always, people on the show may have interests 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. That's it for this edition of Market Foolery. The show is mixed by Dan Boyd. I'm Mac Greer. Thanks for listening! We'll see you tomorrow!
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jason Moser owns shares of Apple, Berkshire Hathaway (B shares), and Chipotle Mexican Grill. Mac Greer owns shares of Alphabet (C shares), Amazon, Apple, Chipotle Mexican Grill, and Facebook. Matthew Argersinger owns shares of Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), and Chipotle Mexican Grill. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Chipotle Mexican Grill, and Facebook. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Shutterstock. The Motley Fool has a disclosure policy.