Chapter 1: Why does February feel like the longest month?
Why does the shortest month of the year sometimes feel like the longest? You don't have to wake me up when February ends because Motley Fool Money starts now. I'm Rick Nars, and today I'm joined by fellow analysts, Jason Hall and Travis Hoyum. We're going to take a look at the potential bidding war for PayPal and a new wrinkle in the Warner Brothers discovery buyout battle.
But first, we all have a type. We all have the kind of stock that we gravitate to as an investing style or an industry. Sometimes we find ourselves falling for an unlikely, if not outright surprising investment. Maybe it's a stock that isn't actively followed by most of our fellow fools. It's okay to venture out of your comfort zone of your radar. This is a safe space, so it's time to fess up.
Chapter 2: What unlikely stocks are the analysts willing to give up their Fool card for?
What are you willing to give up your Fool card for? Jason, let's start with you.
I will admit that over my 15 years as an investor and as a Fool, I've certainly become more Tom than David. That means that I might not have to give up my Fool card for this one, But the stock that I'm going to talk about is one that Tom actually sold out of almost all of his services in 2024, and that's Live Oak Bank shares.
What do you like about Live Oak?
It's a combination of specialization, but also extremely high-quality origination. This is a bank. It's a little bit anachronistic because they count on the people that give them capital, the depositors, to be a different group than they're lending to. Their depositors are basically online savers. They pay high yield in their online savings and CDs, but they lend to small businesses.
But it's the combination of specialization and extremely high-quality origination that I really like. Lenders make mistakes by either going into markets they truly don't understand, or just staying at the table or staying on the dance floor while the music's playing, and then making bad loans as a result. Live Oak's founder and CEO, Chip Mahan, he's one of the OGs in online banking.
But it wasn't just building the tech and the platforms and moving banking out from behind the teller desk and moving it to the internet.
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Chapter 3: What is the potential buyout chatter surrounding PayPal?
It was also building lenders that don't make bad loans. For Live Oak, it lends to small businesses, but it just focuses on specific verticals. It actually builds out a team of in-house experts on those verticals before it starts to ramp up its lending.
As a result, not only does it lend responsively, but it has another benefit, especially against community bankers and also against a lot of large bankers that don't really do the same thing. Let's say you're a vet, and you own a couple of vet clinics, and you want to borrow some money to improve your technology.
There's a very good chance that your Live Oak banker has helped a dozen other vets do the same thing. That's a very important resource that's a value add that you get. It's also one of the largest small business administration lenders. That's big value. It gives it an edge against a lot of small banks that just don't know the process the same way.
And it's also great for investors, because the SBA loans are backstopped, and that reduces the risk.
What makes it different from the other stocks you've gone out with before?
It's interesting, because this is a big bank. It's a multi-billion-dollar valuation company, and they've got billions of dollars in assets under management.
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Chapter 4: How will the Warner Bros. Discovery love triangle play out?
But I've never really had a lot of exposure to small businesses. The combination of tariffs and trade pressures and inflation over the past year we've seen that that impacts small businesses in far outsized ways compared to enterprises. So, that exposure is something that I haven't gone through before. But here's the funny thing that's happened over the past year.
Mahan and his team have shown their chops. Shares are up almost 20% over the past year. That's handily beating the market. And if we look at from the tariff tantrum lows, the stock is basically double the S&P 500. So, it's a business that's really delivering well in the tough environment.
What about you, Rick? What are you willing to risk your Fool card for?
I was initially brought into the Fool. Tom Gardner brought me in a little more than 30.5 years ago. But then I eventually gravitated to David's Rule Breakers newsletter service. I've been a growth investor all along. Contrary to what I'm usually looking for, I like Upbound. That's UPBD. It's a company that you all know better as Rent-A-Center.
because they have more than 1,700 rent-a-centers around the country.
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Chapter 5: What makes Live Oak Bank an attractive investment?
That is their main business, but they have a couple of other cool things about them too. What's so attractive about Upbound? Five years ago, they bought this company called Aseema. This is a platform that they're letting others. Obviously, their business is rent-to-own. There's a rental community that isn't going anywhere.
A lot of people don't have the high credit scores you need to be able to buy furniture at traditional furniture stores and appliances. They provide that. But a neat acquisition five years ago, they bought Aseema. And with that, they're able to provide this platform that they use to other businesses.
So, they're able to use the strength of theirs and actually help a lot of smaller indie businesses come along. And a year ago, it acquired a company called Bridgit, B-R-I-G-I-T, which is actually a very popular app. with millions of users that helps people budget. So it's a great ecosystem where they have a proven model.
Now they're able to help other people do what it does, almost a Shopify-esque situation. And now they have this app to help people improve their credit scores and become better budget-minded people. So it's just a quality company all around. All right. So why is it worth giving up your full card for? Yeah.
Chapter 6: What are the advantages of investing in Upbound (UPBD)?
Here's the thing. This is a company that right now, again, I'm a growth investor, but you can buy Upbound for five times their forecast for forward earnings. Just five times earnings, has a dividend yield north of 7%. The stock's taken a beating over the past year, making it this attractive stock.
No, it's not this dynamic growth stock, but revenue has been in the high single digits for about two years now and accelerated to 11% in the quarter reported last week. So, yeah, I think it has a lot of cool things, but definitely a value stock in every sense from me, a growth investor.
Alright, Travis, you're not getting off the hook here. What's your stock?
One area that I usually stay away from is medicine and healthcare, for a number of reasons. It's not necessarily my expertise. Pharmaceutical companies, let's be honest, they're gouging most of their customers in what they're buying. I hate paying those doctor bills when you're in there for 15 minutes and suddenly you're spending $400 for something. But there's a disruption story in healthcare.
It's volatile. It's controversial. It is hims and hers.
Yeah. It's very controversial. This is one that I've very much struggled to get behind myself. I know you're a bull on it.
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Chapter 7: What is the disruption story behind Hims and Hers?
The floor is yours. What do you like about the stock?
To be clear, this very much falls in the Rule Breaker category, or what I like to call as asymmetric opportunities. All that means is, if you buy $100 worth of stock, all you can ever lose is $100. But it could become Nvidia, where you're looking at a 75, 200X return over the next 20 years. That's the upside potential for these Rule Breaker kind of companies.
I think Hims and Hers has that in spades. They are doing things completely differently than the status quo in healthcare. So they're taking those expensive and time-consuming doctor visits, the trip to the pharmacy. Jason, you've got a little kid. You know that you don't just walk into a pharmacy, get your stuff, and walk out. There's always some sort of pain in that process.
So they're going direct to consumer. They fall under this telehealth category. I don't really like that terminology. But you're going directly into the app. You're answering questions. I got my labs done by them last year, so I know more about my health than I would in some ways than going to a traditional doctor. Now, they've been known as an ED company in the past.
Chapter 8: What predictions do the analysts have for the market in 2027?
They're now known as a GLP-1 company. That's gotten them in hot water. They recently got into a lawsuit with Novo Nordisk. That is really what's been the attention of the market over the past couple of months.
But the long-term story is, if we look at where this company is going over the next 10 or 20 years, is that they're doing things in a much more consumer-friendly way than anyone else in healthcare, and their incentives are lined up with increasing access and lowering costs. No one else in the healthcare industry can say that.
Well, I guess it's all out there now.
Coming up next, it's time to board a time machine that goes only 365 days into the future. Well, it's kind of scary. But is it scary when a vampire eats that white onion? What? Who? A friend of mine, Selene. Scannattaa Scannata. By scanning the Lidl Plus app, you get weekly Lidl Plus offers. Did you like the white onion or not?
A couple of stories are breaking this week, but that's this year's news. It's time to party like it's 2027. I'm going to bring up some timely topics, and I want your takes on how you think the situation plays itself out on February 24th, 2027. Let's start with PayPal.
The fintech pioneer moved nicely higher on Monday in an otherwise down market following a Bloomberg report that it's been approached by other companies looking to either buy it out entirely or pay for one of its businesses. Where are we a year from now on this, Travis?
They should probably be bought out. This is not a business that the market particularly likes. You look at the stock, price earnings multiple, free cash flow between 7% and 8%. Cheap stock, somebody, PE, another company would want to buy them, but who actually buys them? It's a profitable business.
It's not an exciting business, but strategically, they should be on their own because they want to serve as many companies as possible. Maybe it makes sense in big tech, but can big tech actually pull that off? I don't think so. I bet they're still a solo company, and this is still just a ho-hum stock. Jason?
I think there's going to be interest for buyers. I do think, maybe to a certain extent, PayPal's board is looking for a buyer, but that buyer is going to be PayPal. Alex Chris was not shown the door as CEO because his strategy wasn't working quickly enough. That's why he was pushed out. But the decision to replace him with Enrique Loris, I don't think this is about innovation.
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