In this podcast, Motley Fool contributors Tyler Crowe and Matt Frankel discuss:

• Taiwan Semiconductor's most recent earnings report.
• The torrid pace of AI spending.
• Lower mortgage rates are taking the cork off existing home sales and refinancing.
• Insulation contractor TopBuild now does roofs.
• Ferrero will acquire WK Kellogg.
• Two stocks worth watching this earnings season

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.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

A full transcript is below.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

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*Stock Advisor returns as of July 15, 2025

This podcast was recorded on July 10, 2025.

Tyler Crowe: Taiwan Semiconductor's earnings say full steam ahead for AI, and the housing market is getting some of its best news in a while. You're listening to Motley Fool Money. Welcome to Motley Fool Money. I'm Tyler Crowe, and joining me today is Motley Fool analyst Matt Frankel. Matt, thanks for being here.

Matt Frankel: Thanks for having me. It's always fun to be on with you.

Tyler Crowe: We do a lot of conversations. Offline and doing one here is going to be great. On today's show, the snacking industry is actually coming for the breakfast aisle. The housing market saw its first green shoots in a while. There's merger talk in the building supply industry, and Matt and I are going to give some earnings watches for the upcoming quarter. But we're going to start today's show with Taiwan Semiconductors because they just released their second quarter or June earnings earlier today. Taiwan Semiconductor manufacturing's revenues rose about 39% in the quarter, and TSMC CEO C.C. Wei said that AI chip demand still, they think is outstripping the current supply that they have, and the company has pledged to spend $100 billion ramping up manufacturing. Now, Matt, I'm probably not alone in being flabbergasted, every time I hear a projection about spending and CapEx related to AI. NVIDIA just passed the four trillion dollar market cap threshold a couple days ago, and it's still hard to wrap my head around. I think the easy question is, will AI spend, continue to grow? I think that's a little too easy. I want to ask you, do you see AI CapEx spending continuing at this rate?

Matt Frankel: Well, a 40% year over year growth rate is only sustainable for so long. This is an acceleration. It's worth mentioning. Last year, in 2024, Taiwan Semi reported 30% year over year revenue growth. This is a pretty big acceleration after an already very strong year. I think over the past 30 years, Taiwan Semi's revenue's grown at about 18% annualized rate. It's really picked up in the past couple of years because of all this AI spending. This is a massive business, especially for one that doesn't make any of its own products. It makes products on behalf of other companies. All of their customers, just to mention some on their customer list, Apple is their biggest one. But they also make chips for NVIDIA, AMD, Broadcom, Tesla there are a lot of companies they make chips for on a third party basis, and these are deep pocketed companies that are all committing a lot of money to AI investment. When you ask will this continue if you're asking over the next five years, I could see that growth rate actually being sustained. But if you're asking beyond, at some point, we're going to hit a peak, but I don't think we're there just yet.

Tyler Crowe: The interesting thing is a lot of the companies I follow are like in the construction industry related to AI, like all the electrical supply contractors and the builders and things like that. Their backlogs for AI data centers and all that stuff is still growing at really large rates. Their remaining performance obligations, their word for backlogs, have been growing at similar rates, which is also, to me, a leading indicator for a lot of this because you got to build the data center before you can put any chips in it. Beyond the same thing, beyond the five years, it starts to get really murky because we're 40% for five years straight is a lot, but certainly over the next 2-3 year window, it doesn't seem unrealistic to continue to keep doing this.

Matt Frankel: One of the really good ways to get ahead of demand is to look at what the data center industry is doing, and I'm glad you brought up building for that reason because so many data centers are being built right now. There's a lot of if you look at, Digital Realty Trust or Equinix's, construction activity, there's a lot going on, and it creates like a forward looking projection, if you will, because, the company will order a new data center, start building it. At some point later, it's going to be filled with chips and things like that. That's a really good forward indicator of how demand is doing.

Tyler Crowe: Let's put the rubber of the road here really quick regarding Taiwan Semi. It's a recommendation in the Hidden Gems dividend service and several other molecule services. After seeing these results and the current valuation that we're looking at for Taiwan Semi, do you still see the stock as a buy?

Matt Frankel: Given how quickly its revenue is growing, it trades for about 24 times forward earnings, there's not a lot to dislike about this company. That 1.2 trillion dollar valuation sounds high, but it really isn't when you look at how the business is doing.

Tyler Crowe: If we're looking at these numbers for 2, 3, 4 years, a company can grow into a 26 times forward earnings valuation or forward earnings valuation pretty quick. It's hard to see it being an awful investment from here at current valuations. Next up, mortgage rates are on the decline, and the housing market is responding quick.

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Tyler Crowe: The housing market has been looking for something, anything resembling good news lately. Finally, it got a little bit. The average rate for a 30 year mortgage in the United States has declined five weeks in a row, and it's now down to 6.77%. Now, that certainly isn't the sub 3% mortgages that we saw in the 2021 period, but it is a nice improvement from the greater than 7% mortgage rates we've seen so far this year, and I know I have been like mortgage rate shopping for quite some time. Matt, the housing market appears to be taking advantage of this situation much faster than we've seen other mortgage rate movements lately, and something you've been following is like housing volume is really picking up because of this.

Matt Frankel: You mentioned the other mortgage rate moves. This isn't the first time we've seen mortgage rates cool off from the highs, which is why this move is a surprise to a lot of people. Mortgage rates peaked at about 8% when inflation was really high. But even they've come down a little bit, then they go up, then they come down, they go up, and they have oscillated between 7.5% and like six and three quarters in recent times. All the other times it's happened, this is a key difference. All the other times it's happened, there hasn't been a lot of housing inventory. Now that's changed. There's a lot more inventory on the market with this decline. People who want to buy houses are taking advantage, just to name some of the statistics just last week alone, week over week, application volume was up more than 9%. Refinancing is 56% higher than it was a year ago. People who got mortgages in the 8% range are finding it valuable to refinance right now. Purchase applications are up 25% year over year on a seasonally adjusted basis. The numbers really look surprisingly strong, given that, you know, over the past week, the average mortgage rates down two basis points. It's not like it's been a sharp decline in the past week, but now buyers are suddenly coming into the market.

Tyler Crowe: Following the housing move for the past couple of years, it's been trying to poke somebody a stick and say, Come on, do something and it's funny to actually see it finally happening. Part of me wonders if it's a little bit mortgage and also our mortgage rates, excuse me, and a little bit of just like the people have been putting it off and using this as that time to start taking the lid off, especially with the buying season here in the spring and summer. Now, you and I and a couple other people, longtime Motley Fool contributors, analysts. We spend way too much time talking about housing, investing in housing, investing in real estate. There's some side channels that get a little unhinged. But with mortgage rates are declining, the probability of a rate cut actually looks to be in sight something that I have been hesitant to say for quite some time. There is pent up demand for homes. Matt, with this backdrop, what stocks in this particular market look interesting to you?

Matt Frankel: I've been saying the Home Builders forever, and so have you, but it's really tough to gauge the dynamics of Home Builders when existing homes are becoming more appealing than they had been for a long time. I won't say that. I'm really looking at rocket right now, RKT the largest lender. They're a very profitable company. I think refinancing in particular is a big opportunity. I mentioned refinancings up 56% year over year, and that's because rates fell to 6.77%. Imagine if rates fall to 6% or 5% in the next couple of years, Americans are sitting on $35 trillion in home equity that's the most ever, and a lot of it's just waiting to be tapped. A lot of people want to do big projects, but won't because it's expensive.

Tyler Crowe: Actually, the Refi number was the one that really stood out to me, as well. I didn't go to the mortgage originators, like Rocket. I actually went to the home repair and remodel industry because, again, this is everyone stared at their walls in 2020, 2021, did all those projects, and now it's been like three or four years. Everyone's starting to get that itch to do projects again and lower mortgage rates. A refinancing is a good opportunity to that. I've been looking at companies like Home Depot that have underperformed just about the time the interest rates started to climb a few years ago, we had that big pull forward in remodel activity and things like that. Home Depot and a lot of other building supply companies, and one company in particular is TopBuild. It's an insulation distribution and installation contractor specifically for insulation. That company just so happens to be the company we're going to be talking about next. Continuing on our theme of the housing market, home repair, building products, there's a company Top bill. They just mentioned it as a distribution installation contractor. They recently announced it's going to acquire Progressive Roofing. Matt, can you just give a quick breakdown of what this deal looks like?

Matt Frankel: Progressive Roofing, as the name implies, they're one of the largest commercial roofing installers in the United States. They make about 70% of their money from what's called reroofing, which is people like me needing a new roof and maintenance and 30% from new construction homes, both of which can get pretty nice tailwinds, if the real estate market keeps going as it's going. The deal is it's $810 million in cash. It looks like a great deal for TopBuild if if the market heads in the right direction. That's about nine times progressives EBITA over the past 12 months. They expect there to be some synergies, like whenever you acquire two businesses that have some overlap, you can usually combine some operations and things like that and get some cost savings. It looks like a strong acquisition. They're going to have to take on debt to do it. TopBuild has about 300 million in cash right now. Another roughly half a billion dollars will need to come up with through debt, but they have a really healthy balance sheet, about 1.4 billion in debt with $11 billion market cap business and highly profitable. I like this deal. I think this is not the last consolidation we're going to see in the industry in 2025.

Tyler Crowe: We've seen some more splashy things when it comes to acquisitions here. Brad Jacobs of XPO Logistics and United Rentals and a bunch of other we'll call it the boring economy guy who rolls up companies is getting into building supplies with QXO. It seems to be a hot activity lately as mergers acquisitions roll ups in this industry. TopBuild as I said, installation of insulation the real dirty work. Anybody that's done contracting work knows that insulation stinks as a job to do. But it's been a spectacular investment after it got spun out of Masco Corporation in 2015, several Motley Fool recommendation services. You and I have been following this company in this industry for quite a while. For TopBuild, much of its success has come from rolling up those small distributors and installation contractors across North America. It's been their calling card is going and buying out mom and pops who are maybe coming to the end of their time of wanting to run a business or some small regionals that success story of Bolt-on acquisitions. Now, roofing isn't insulation. Honestly, I'm a little anxious when a company makes an acquisition that is slightly tangential to what they're doing. Am I being a little too apprehensive here, because, I do tend to be a little bit more nervous than you.

Matt Frankel: Well, insulation and roofing are related parts of the building process. It's not like they're an insulation company, and they're acquiring a concrete manufacturer or something like that. It's a very related part of the business. But I do get your point. Some of the synergies I mentioned come from the fact that there's a lot of overlap in the processes. You generally don't put in a new roof without checking your insulation at the same time. There is a lot of overlap here. But no, I definitely get your point when companies start to step outside of their wheelhouse a little bit. It'll be worth watching, but it looks like the price is right, so they have some wiggle room to have a learning curve in there, if you will.

Tyler Crowe: I'm probably a little too nervous by nature, but I do have to admit, as I've looked at this deal, I think overall, we can talk about the business stuff. But more importantly, for me, I think management has developed enough of a track record that I'm willing to give them the benefit of the doubt right now or tie goes to the base runner, I guess, if you will. With the refinance market picking up so could activity in the roofing business along with installation. It might be a good time to be making this acquisition. Speaking of M&A, we're going to move on to our next store here, which is going from roofing to the breakfast aisle because that seems to be getting a hot market that also just happens to be getting a little bit sweeter. Earlier today, Ferrero Rocher or Ferrero International, the Italian private company has agreed to acquire WK Kellogg for about an enterprise value of 3.1 billion. WK Kellogg, of course, was the cereal business that was split out of Kellanova I believe it was either last year or a couple of years ago. It was a relatively recent split for the two companies where Kellanova wanted to focus on the snacking industry. WK Kellogg was going to take the cereals.

But Ferrero Rocher is very much a candy company, and it's interesting to see them going in this direction. It's about $23 per share for WK Kellogg in cash. About 31% premium Keeling's closing price today. Matt, what did you actually think about this deal? I know it's hard to really put a pin on private companies, especially an Italian one. We don't seem to have a lot of information on private Italian companies here in the US public markets. But we've seen tons of M&A activity and flirting with M&A activity. We saw Mondelez and Hershey talking about getting together early or late last year. Do you have any insights as to why you think there's so much talk and commotion in particular in the package food industry lately?

Matt Frankel: Well, in this particular case, there's a couple key takeaways. One is that Ferrero has been building out its US portfolio for some time. They acquired all of Nestle's US candy business a couple of years back, for example. You might have some of their products in your house right now and not know it. It's summertime. A lot of people keep those bomb popsicles in their fridge. That's a Ferrero product. They have a lot of brands that are very well known to Americans. Second, and this goes more to the broad package food industry that you were talking about. The definite trend is to not only diversify your product portfolio, but diversify it in a way toward healthier products. Now, I know a lot of Kellogg cereals, frosted flakes are not health food, but things like Kashi and raisin bran and rice krispies. We've seen a lot of the companies that specialize in sweets, like Coca-Cola, Pepsi, really diversifying to not necessarily health foods, but to more healthy brands that are that consumers seem to want more nowadays than their traditional products. I think it's a diversification maybe anticipate some changing tastes in the market to insulate themselves from being just a sweets company. That's a common trend that we've been seeing throughout the packaged food industry.

Tyler Crowe: Seems like it's an industry that has been struggling with debt, with trying to figure out a lot of what they're doing with their maybe some brands that are getting a little stale, trying to do some refreshes at the same time. For a lot of these snacking companies, really high cocoa prices haven't exactly helped them along the way when it comes to trying to make a lot of this work. A lot of dividend stalwarts have been really, I would say struggling to really grow the business, and we've seen it in their valuations of late. Honestly, with the package food company industry, I don't know if I'm that interested in any stocks right now, but it's certainly much more fascinating to watch with a lot of these portfolio reshufflings. Is there anyone in particular that is on your radar?

Matt Frankel: I honestly think Pepsi and Coca-Cola are the two standouts in the industry still and have done the best job of adapting to changing tastes over time out of all the package food companies. I'd probably give it to Pepsi because they have a lot more food than beverage.

Tyler Crowe: On our way out here, let's take a quick 30 seconds. Second quarter earnings is coming up. What are you watching?

Matt Frankel: Well, banks are the obvious answer just because they're reporting first, but they're also a really good proxy for just general consumer health. By looking at things like loan defaults, by looking at, trading volume trends, how volatile things have been there. There's a lot you can tell from bank earnings that have implications on pretty much every other company in the United States. That's really what I'm watching next week. Prologis is another company that reports early that we've talked about that is on my radar. They say they're nearing an inflection point. I want to see if we're there yet.

Tyler Crowe: This quarter, I'm actually going to be watching Home Depot for a lot of the reasons that we mentioned when we're talking about mortgage rates. Less for the actual earnings, but I really want to dive into the earnings transcript and see if some of this activity that we just talked about with Refi is translating into increased demand. If management thinks that this is a continuing trend or a little bit of a short term blip that we've been hoping would actually last longer than a couple of quarters here with the mortgage market. Matt, thank you so much for joining me today on Motley Fool Money. As always, people on the program have 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 Motley Fool editorial standards and are not approved by advertisers. Advertisements or sponsored content are provided for informational purposes only. See our Fool advertising disclosure. Please check out our show notes. I'm Tyler Crowe. Thanks for listening. We'll see you tomorrow.

Matt Frankel has positions in Advanced Micro Devices, Digital Realty Trust, Prologis, and Shopify and has the following options: short January 2026 $135 calls on Shopify. Tyler Crowe has positions in Prologis. The Motley Fool has positions in and recommends Advanced Micro Devices, Digital Realty Trust, Equinix, Hershey, Home Depot, Nvidia, Prologis, Shopify, Taiwan Semiconductor Manufacturing, Tesla, and TopBuild. The Motley Fool recommends Broadcom, Nestlé, WK Kellogg, and XPO and recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.

In this podcast, Motley Fool analyst Jason Moser and contributor Lou Whiteman discuss:

• Starbucks' move to sell part of its China business.
• Hershey hires a new CEO.
• Meta moves for more talent and invests in eyewear.
• What should be on investors' radar this earnings season.

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.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

A full transcript is below.

Should you invest $1,000 in Starbucks right now?

Before you buy stock in Starbucks, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Starbucks wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $680,559!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,005,670!*

Now, it’s worth noting Stock Advisor’s total average return is 1,053% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 15, 2025

This podcast was recorded on July 09, 2025.

Jason Moser: Starbucks pivots in China and Meta makes some big investments. You're listening to Motley Fool Money. Welcome to Motley Fool Money. I'm Jason Moser, joining me today. It's Motley Fool analysts Lou Whiteman. Lou, thanks for being here.

Lou Whiteman: Great to be seen.

Jason Moser: On today's show, Hershey has a new CEO. Meta is making some big investments in AI, and earning season is, believe it or not, right around the corner. But today, we begin with the king of coffee. Reports are that Starbucks has garnered quite a bit of interest in its China business, as it looks possibly selling a majority stake in that business. The company said, "We remain committed to China and want to retain a meaningful stake in the business. Any deal must make sense for Starbucks business and partners." Lou, China has been a bit of a challenge for Starbucks as of late. Do you think this is the right move to try to sell the majority stake in this business?

Lou Whiteman: I do. I like this a lot. New CEO Brian Niccol, he's got a lot on his plate. He's articulated a plan, the back to Starbucks. He's going to revitalize to domestic business. But look, it's going to take time, it's going to take resources. Finding a partner to work with China, it would allow Starbucks to retain some of the upside, but it is a massive market. I get it. But it would provide a cash infusion and take one thing off that plate off of that daily agenda. It feels like a win-win.

Jason Moser: It seems like there was a lot of interest. Something close to 30 equity firms and whatnot actually submit it.

Lou Whiteman: Big money?

Jason Moser: Yeah, big money, valuing it anywhere from, 5-$10 billion, I saw. You talk about the growth opportunity in China, and that's been part of the story. I think with Starbucks for many of us for many years, it's not to say they haven't grown there. They have almost 8,000 stores in China to date. But, they're talking about really going so far beyond that. It's 10% of overall revenue right now. It's meaningful, but it seems like it could be more meaningful. How big do you think they can grow as part of the business?

Lou Whiteman: They talk about 20,000 locations, which is more than double. That, honestly, I don't know about that. That's part of why I think I'm OK with them at least finding a partner or keeping some upside, but not all of it. I think the Chinese consumer, like the American consumer and most other consumers, I think they're going to lean into domestic brands over international ones as that market matures. I think to some extent, it's happening. Maybe refocusing the operations, finding a partner, growing that way and doing it, not just rubber stamping what Starbucks is here. I think there's probably room for growth, but I don't think maybe it's what we were talking about a few years ago, and I don't think it's priority one right now for them, either.

Jason Moser: This seems like a little bit like history repeating itself. You remember in the early days when they were growing internationally, and they had, in most places, they were taking that company owned approach to the stores. Then, it turns out not every country is the same, Lou, and the cultural clashes, the differences, it was all very different in so many different ways, in so many different locations. They pivoted to partnering up with local partners in those respective markets. I'm with you. I think this is a good move. I actually like it. I think it gives them the opportunity to participate in the upside without having to devote so many resources to it. I like the decision. I feel like this is something that Niccol has been mulling around for a while. I'd be curious to know. He's closing in on a year in September with the company. What grade would you give Brian Niccol today?

Lou Whiteman: Forget what I think. [LAUGHTER] Howard Schultz seems bought in. I think we can all agree. Howard's very smart and also can be a meddler. I think Howard Schultz giving him an A is very important. But I don't think Howard's wrong. I think Niccol's plan to refocus Starbucks give us back the experience we fell in love with and also adjust the menu, so we're not waiting in line for 40 minutes in the drive through. It all makes sense. It's a strong grade, it's an incomplete grade because it's one thing to say it. We have to execute and do it. But I like where they're going with.

Jason Moser: The stock is basically flat since Niccol took over, or you think it's just a couple of percentage points. But it still boasts a premium multiple at 34 times earnings, do you think this stock from to date, do you think this is an outperformer in the coming five years?

Lou Whiteman: I think so. I'll be honest. The valuation gives me pause. I don't think it's going to be, I think maybe the hypergrowth days are over. But look, the brand resonates. I think you'll see operational improvements under Niccol which will boost results. You have, what, 2.5% dividend yield to boost your total return. Yeah, maybe it isn't what the growth was before, but it still, I think, has the bones of a market beater of just a top operator.

Jason Moser: Yeah, I'm with you. I'm hanging on in my shares too. Well, next up, Hershey has a new CEO.

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Jason Moser: Hershey Company has a new CEO, Wendy's CEO Kirk Tanner will replace Michele Buck, who's retiring after almost eight years as CEO of the company. Tanner will take over on August 18th and previously served over 30 years at Pepsi. Lou, I was talking with our colleague, Ant Schiavone, who follows Hershey closely. He said that while Tanner definitely has the resume to be CEO with those three decades at PepsiCo., and he had a short stint at Wendy's, it started in February 2024. It was a bit shaky. Shares down around 40% during his tenure. They had to cut the dividend earlier this year. The Ant noted that was likely to happen regardless who was CEO. What do you think his biggest challenge right off the bat is going to be taking over for such a, I mean, this is just a legendary, iconic American brand. They're going through some tough times. What do you think the biggest challenge he's facing us?

Lou Whiteman: A brand that has always or mostly promoted from within, too, which I think is interesting, too. I think you said it well. It's hard to judge the time at Wendy's, both because it was so short and he did step in at a difficult time. But it feels like Hershey's is more similar to what he did at Pepsi and he was successful there. Wendy's is more retail focused. I think that's a positive. I suspect his biggest challenge is to continue the pivoted way from chocolate, from cocoa prices. Hershey's has quietly built up this roster.

Jason Moser: What?

Lou Whiteman: Pirate Booties, Dot's Pretzels, SkinnyPop. It feels like there's further opportunities to go in that direction, and bringing someone in from Pepsi suggests to me, at least that that's where the board is focused. That's his challenges to execute there and make that happen.

Jason Moser: I think you're right. You got to broaden that portfolio because we've seen this over the last several quarters, years, the cocoa prices have really been hammering Hershey, and it's always fun to pay attention during Halloween to see what candy he's selling. Last year, we definitely saw a trend toward, like, the fruity, sugary candies, chocolate, a little bit less so because it was getting more expensive. Then the dreaded shrinkflation came into play. They're making the candy bar smaller Lou. Not cool, but I guess I get it.

Lou Whiteman: Hey, my doctor likes it, even if I don't.

Jason Moser: Exactly. We talked about Brian Niccol. Now we're talking about Hershey here with Kirk Tanner. When you see new leadership in play here, how long do you typically give new leadership to start delivering?

Lou Whiteman: It's so hard, because obviously, every situation is different. You have to factor in macro, what situation does a new leader drop into. But look, generally, I think, at least a year, we talk about this a lot. We're long term focused investors. We understand that quarter to quarter fluctuations happen, and they're part of the business, and we don't panic. We don't freak out with one quarter. We don't get too excited. I think we have to give leadership the same understanding, the same philosophy. In a case like this the challenges, the consumer, cocoa prices, perhaps maybe you need more time, but I'll tell you what I do want Jamo and what I'd like to see is within a year, what Niccol gave us, I want to hear our leadership articulate a plan. I want something I can evaluate from here. You may not be able to solve the problem in a year, but I want to hear how you're planning on doing it within a year.

Jason Moser: I like that. One of Tanner's go to moves at Wendy's was offbeat collaborations. They did a Girl Scout thin mint frost Deep. Tried that one, it was good. Spicy Taki chip chicken sandwiches. Hey, man, I love Takis and I love chicken sandwiches.

Lou Whiteman: I don't love that.

Jason Moser: Sponge Bob brand and burgers. Let's play armchair CEO for a second. What brand collaboration would you recommend for Hershey's?

Lou Whiteman: The company that brought us peanut butter and chocolate, [LAUGHTER] they have to get collaborations. This is a no brainer, but I love Dot's Pretzels. Looking at the website, they have cinnamon season. They have barbecue. They have honey mustard. They don't have chocolate covered pretzels.

Jason Moser: That crossed my mind.

Lou Whiteman: It seems so obvious.

Jason Moser: I have more of a salt tooth than a sweet tooth. I was thinking, I love Dot's Pretzels. I have in the pantry at home. I also like SkinnyPop. That's pretty good stuff. I was thinking, Hey, you get SkinnyPop and you partner up with McCormick for some old bay SkinnyPop? You can cheat and put the stuff on at home, but I guarantee the stuff in the bag is going to be way better. You're bringing two worlds together right there. I'd be all in.

Lou Whiteman: My Baltimore roots are speaking to me right now. [LAUGHTER] I'm in for that. Mr. Tanner, get on that.

Jason Moser: Last question on Hershey, do you think Tanner is still here in five years?

Lou Whiteman: I do. I do think fit matters, and I think the resume implies a better fit, like we said. To use the Willy Wonka, I think maybe this is a golden ticket, and I think it can work out well for Tanner and for Hershey shareholders.

Jason Moser: Lou Meta continues to make big investments in AI. Founder and CEO Mark Zuckerberg is spending big to recruit AI talent. We're talking tens, hundreds of millions of dollars from reports. Now we also saw that the company's taking a minority stake in Ray-Ban maker Es Luxottica, and that really plays into these Ray-Ban AI glasses that they're starting to get out there. I'll be interested to see how this holiday season, how those are received. Now, as we saw with the Metaverse, Zuckerberg's playbook is to go big or go home, $3.5 billion investment in Ray-Ban, reportedly hundreds of millions of dollars in recruiting bonuses. that's a lot. What should investors make of all the spending?

Lou Whiteman: Usually I find interesting back in January, Meta committed to, what, spending $70 billion in CapEX, mostly to build out AI. Our focus was on chips at the time. Certainly Invidia is getting a lot of love here. But, it feels like we're kidding that next step, where, what do we do with all that capacity, making the magic happen? Look, if you think chips are hard to come by and they are, just how hard is it going to be to get the right talent and the right partners and all of that. I think be aggressive makes sense. Zuckerberg likes to be aggressive, but focus on the big picture of try and be a first mover here. I get what they're doing, and I think it makes sense, because at some point, we got to use all these chips or something, and it better be neat.

Jason Moser: Yeah, this is an arms race like we haven't seen in some time. All these companies is just foot on the gas, and they're spending a lot, but clearly, that's telling us something. I think we're in the middle of something big here. Now, the Metaverse spending, that led to the year of efficiency, if you remember that. Investors became worried about return on investment, do you see this playing out the same way or like, how long of a leash does Meta have here to ultimately build out their AO chops and demonstrate real return?

Lou Whiteman: I'm curious what you think. I think here the difference is last time they were out on their own. They literally changed their name to Meta. They were the Metaverse island. For better or for worse, it ended up worse. They owned that space, and there's a lot more there with AI, I think.

Jason Moser: I agree.

Lou Whiteman: If there's not, we have a lot of people going along for the ride. I think as long as everyone else is spending, I think it's a much longer leash.

Jason Moser: I think so, too. I think you said it perfectly. There's a there there. AI, it just seems so much bigger. When we're looking at augmented and virtual reality in the Metaverse, it's fascinating technology, but it certainly is more niche, and it's really not quite developed. The obvious use cases that we're seeing play out with AI. The stock, let's talk about the stock. It's had a good year to date. It's up almost 25%, outperforming the market nicely. At around 28 times earnings today, is this something you're interested in? Do you think this is an outperformer over the next five years at today's levels?

Lou Whiteman: So 28 times earnings. What? That's second most affordable among the Mac 7, which for what it is. But look, for all the talk about AI, we you bury the lead when you don't talk about that core advertising business and its ability to just generate. I'm excited about AI, but I just that core business, I don't see a disruption on the horizon here, and with that business, I think the stock beats to market. That is the engine.

Jason Moser: I think AI is really ultimately making that core business even better. That really is the point. they're going to do ancillary stuff with it. But it is making that core business better, and man, they really own a big slice of that ad market, like you said. Next up, earning season is right around the corner. Lou, believe it or not, earnings season is upon us again. JP Morgan unofficially kicks things off on Tuesday, July 15th. What's something that you'll be paying close attention to this earning season? A trend, policy, specific company, and industry? What you got.

Lou Whiteman: We just talked about Meta's year of efficiency. If we want to talk about so far this year, and we're still early into this year. It has been the year of uncertainty, for public companies. Investors largely gave management teams a pass last quarter when they said, I don't know when it comes to guidance. I think that's understandable. I was one of those investors who, I don't know what's going on either, so that's fine. Two related big picture questions I have as I'm watching now is, A, is there more clarity now than there was three months ago? Is there more management teams that are willing to stick their neck out? Since I'm guessing the answer is maybe not, will investors continue to be patient? Will the 'I don't know answer', will that be acceptable now the way it was last quarter? I think, probably, but I'm curious to see how things play out just kind of. We're always forward looking. As investors, it's scary when there's clouds forward. It's a weird time. How about you.

Jason Moser: Well, I think in regard to your points there, two. We're seeing a lot of headlines coming out here again, regarding tariffs. It's leading right in earnings season. It would be understandable if you hear that uncertainty language. But I don't know, do you feel like folks are just getting tariff exhaustion. Like, it's just day after day, so you know that it's happening, and at some point, you just got to let it go and keep running your business.

Lou Whiteman: Yeah, it feels like it's going to net out as a drag on earnings indefinitely that we're just going to have to grin and bear it with, which is a terrible medium because it's just going to be a slog, unfortunately.

Jason Moser: Well, you asked what I was looking at, and for me, it's in regard to enterprise spending trends, over the last several quarters, there's a phrase that we've seen on a lot of these earnings calls, whether it's Twilio or Cloudflare or CrowdStrike, Palo Alto. You name it. These big enterprise servers, the phrase elongated sales cycles, to your point about uncertainty. Their enterprise customers are just simply not quite certain what the future holds. They're spending with some trepidation and maybe not fully committing. We saw just elongated sales cycles on so many earnings calls over the last several quarters. I wonder if that's starting to come to a close. I wonder if we're going to start seeing some more bold spending from a lot of these big enterprises. I'm going to be following a lot of those companies like I just mentioned, those earnings calls, and that will be one key term that I'll be searching through all those calls, elongated sales cycles. That's just telling you, they're just not spending as much as quickly, and we want to see that turnaround.

Lou Whiteman: It's a great point because putting it both together, there is so much uncertainty. It's understandable not to want to make bold moves, but at some point, business has to go on. Where are we in balancing that? That's going to be fascinating to say.

Jason Moser: Well, we'll leave it there. Lou Whiteman, thanks again for being here.

Lou Whiteman: Always a pleasure.

Jason Moser: As always, people on the program may have 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 Motley Fool editorial standards and are not approved by advertisers. Advertisements or sponsored content are provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I'm Jason Moser. Thanks for listening. Will see you.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of Motley Fool Money. Jason Moser has positions in McCormick, Starbucks, and Twilio. Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike, Hershey, JPMorgan Chase, Meta Platforms, Starbucks, and Twilio. The Motley Fool recommends McCormick and Palo Alto Networks. The Motley Fool has a disclosure policy.

In this podcast, Motley Fool analyst Jim Gillies and host Dylan Lewis discuss:

• Warren Buffett's plan to step down as CEO of Berkshire Hathaway.
• The parallels between Berkshire's succession planning and Apple's transition from Steve Jobs to Tim Cook.
• The available cash, opportunities, and challenges ahead for Greg Abel and team.

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.

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A full transcript is below.

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Dylan Lewis: After 60 years, Buffett passes the torch. Motley Fool Money starts now. I'm Dylan Lewis. I'm joining for the airwaves by Motley Fool candidate analyst Jim Gillies. Jim, thanks for joining me on this momentous Monday.

Jim Gillies: Indeed. Thanks, Dylan.

Dylan Lewis: We talk about the news very often. We don't always get something this good when something happens over the weekend. To quote the great Warren Buffett himself, the Time Has Arrived. After 60 years as CEO of Berkshire Hathaway, Warren Buffett announced he'll be stepping down at the end of 2025 for a well deserved semi retirement. He announced this Jim, closing out the annual meeting in Omaha over the weekend, which was news to basically everybody except his kids.

Jim Gillies: Correct. Yes, I had I had a number of friends on the floor, and one of them texted me with literally as he was speaking going, holy insert golf word here. Buffett just announced his retirement and I'm like, OK, I have to take a moment to process this.

Dylan Lewis: Yeah, in typical Buffett fashion, it wasn't I'm leaving the CEO seat. It was him handing over the reins, but it was in an overview of board meetings and votes, and recommendations. I think if it weren't for the standing ovation, if you had tuned out for a second, you actually might have missed it because it was right at the end of the meeting and discussion.

Jim Gillies: Yeah. Look, I'm a Berkshire shareholder for almost three decades. The entire way, Dylan, I've been told, aren't you worried? He's so old. He's going to die soon. Thankfully, a key lesson from Buffett reiterated many times over the years, including in this most recent annual meeting is like, you know what? Take your time, think through, things things are not that imperative in the moment. I'm very glad I've ignored all of the people saying, Oh, boy, he's really old. I similarly think about it a little bit today. It's like, Buffett has been prepping people for this for quite honestly nearly two decades. I remember after his first wife passed away, Susie, it was always the intent of the Buffett to give away the vast wealth that he's created. Susie was supposed to be the one because she was expected to outlive Warren. She was going to be the one handling the dispensation of that money. Susie's been gone for almost two decades now, Dylan.

We've seen him, I remember back might be 15 or so years ago now where they were first started talking about having the names of multiple people who could take over for him, step in whenever. The names in the envelope that could step in for him have changed. But a number of years ago, Charlie, who, of course, left us just over a year ago, Charlie let slip at one meeting that the only real name in the envelope that could take over for Buffett was Greg Abel, longtime CEO of Berkshire Hathaway Energy, MidAmerican Energy beforehand, and that he just confirmed what everybody largely knew. I don't think much is going to change. First off, in a completely unsurprising development, the board did, in fact, vote unanimously along with Warren's suggestion hands up, who thought that wouldn't happen.

Dylan Lewis: Yeah, zero surprise here.

Jim Gillies: Exactly. Well, also two board members are Warren's kids who, as you said, knew about this. They have, in fact, voted unanimously to pass the CEO's title to Greg Abel. This is the start of 2026. You've got another almost eight months with Uncle Warren at the helm, at which point he will remain as non-executive chairman. He did allude to the idea that should markets behave in a certain way, and he didn't say it, but I will plunge precipitously, they would be interested in deploying some of the massive cash hoard they've got now, which I think is playing with $350 billion. That he would be useful, perhaps reputation wise to help deploy some of that capital should circumstances require it. Again, he was too polite to say, if the markets blow up and people freak out. But that's what we're talking about here. Go back to 2008.

Dylan Lewis: If you find my advice helpful during any time, just let me know, essentially, the.

Jim Gillies: Yeah, exactly. But I don't think a lot's going to change, and part of that is because they've been gradually transitioning the day to day operating business into the hands of Greg Abel. They've long transitioned the decision making at GEICO or I say GEICO, just in the insurance arms, all of the insurance arms into the hands of Ajit Jain. They have long been adding to the responsibilities of Ted and Todd, the investing lieutenants. Buffett has long espoused that a ham sandwich should be able to run this business. In fact, I saw someone was quipping. Another Fool was quipping with us this morning. I hope Greg had a T shirt at that board meeting that said ham sandwich on it. I see the stock fell as much as 6 or 7% today. I wish it fell more. I hope it falls more in the next week or so, because obviously, I'm talking about it now, so I'm locked out. I would be a happy buyer of shares today without a thing and without a concern, frankly.

Dylan Lewis: Yeah, I was going to say this is the first time we've ever seen the market have to weigh what they think of a Berkshire without Buffett, maybe a 4% or 5% discount on shares today. I don't think anyone could find that unexpected. It's a surprise, no matter when it happens. It's a surprise no matter how well they lay out the succession planning. We've known Greg Abel since 2021 formally, would be taking over this seat. I think you're right. I think they've done such a nice job telegraphing what's coming and also telegraphing. There are core Berkshire principles to the way that we approach things, and that probably isn't going to change very much. I remember looking back on some of the content from the morning meetings and the Q&As, and stuff like that over the weekend. Someone had the foresight not knowing what was coming to ask, hi, Greg, what is something you've learned from Warren Buffett over the years? Incredibly pressing question, it turns out.

He talked about how when they were first meeting talking through MidAmerican Energy Holdings and that acquisition, the first thing that Buffett did was zoom in on the balance sheet. The first thing he did was zoom in on the derivative holdings for the company and start asking all these questions about risk exposure, what was actually there. Abel and Buffett both talked quite a bit at the annual meeting about the importance of being balance sheet oriented, looking at the fundamentals of these businesses. If you're a Berkshire shareholder, none of that stuff is going to change. That is going to continue to be the guide for how this management team is making decisions.

Jim Gillies: Yes. I don't think it was a surprise to anyone who's been a long term Buffett slash Berkshire follower. If you were not aware that Uncle Warren likes his balance sheets. If you ask Greg, what's one thing you learned? I thought you were going to say how to keep a secret because it did that a little bit.

Dylan Lewis: I'm guessing Greg maybe had a little heart palpitation there on stage, learning alongside all the Berkshire shareholders that this was happening.

Jim Gillies: What a vote of confidence, though to have that even though he knows the job is going to be his? Again, look, Uncle Warren is 94. He'll be 95 at the end of the summer. If you don't expect someone approaching that anniversary of their existence to be maybe wanting to slow down a little bit, plan for retiring. It had to have been the subject. Well, as I said, I have heard variants of the, are you sure you want to be here for as long as I've held shares, and my own personal shares, at least my earliest ones, I can legally rent a car in the US.

Dylan Lewis: Yes, they've matured.

Jim Gillies: Exactly.

Dylan Lewis: Way to put it.

Jim Gillies: They should hit the gym more. They're starting to have that middle age precursor happening there. Continue anyway.

Dylan Lewis: As you noted, this is a business now sitting on an incredible amount of cash, 347 billion, I think, as of most recent report and the updates over the weekend. I have to imagine that that was also some of the intentionality with this planning was Buffett unwinding some of the large positions that existed with Bank of America with Apple over the years and really putting Abel and the management team in a position to make decisions that they were excited about that they were interested in that followed Berkshire playbook and probably to be opportunistic as there's possibly some clouds out there on the horizon.

Jim Gillies: Yeah, he downplayed some of the people saying, Oh, you're just trying to set up things for Greg Abel. It's like, no, I'm not so charitable to make life easy for him. If an opportunity was here for me, I'd take it paraphrased. Apple is unquestionably the best a stock investment that Buffett has made. You could argue others have done better percentage wise or over a longer term. But in terms of the sheer amount of money, Buffett himself said, Tim Cook, Apple's CEO. Tim Cook has made more money for Berkshire shareholders than I have.

Dylan Lewis: Point taken.

Jim Gillies: Well, point taken. I will push back a little bit on Buffett and say, yeah, but you were the one that went into it. Again, ignoring what other people were saying, which 2016 ish was that it's the biggest company in the world. How much growth is there left turned out to do OK. I think it's going to be prescient for Berkshire because, of course, Apple itself went through its own, shall we say, high profile succession plan back in 2010-2011, because founder Steve Jobs, of course, famously, unfortunately, and I say this with all respect, drew the short straw in life. Had a health issue that tremendously shortened his life, and that was tragic. But before he went, of course, and Tim Cook had stepped in for a lot of the day to day stuff with Apple before that. But officially, I think a few weeks before, it's now it's back in 2011. It's a few weeks before Steve's ultimate departure. Tim Cook was made the official CEO. On that day, the stock didn't have a great day. I've said for a number of years now on various Foolish forms from a value creation perspective. Tim Cook has been a far better CEO for Apple than Steve Jobs was. Now, Tim Cook doesn't get this opportunity without Steve Jobs and without the vision and the idea.

I always say, Tim Cook is an execution guy. Steve Jobs is an idea guy or was an idea guy. The execution guy doesn't get to work as magic without the idea guy to start, and so you need both. But the sheer value that's been created at Apple in the Tim Cook era greatly outstrips what was created during the Steve Jobs era. But you got to give Job some credit for what he planted the seeds so that Tim Cook could have the harvest. I think that's what's probably going to unfold with Berkshire Buffett, Greg able is that Buffett has put all seeds in play and has put the culture in play, and has been, as we said before, slowly farming out bits and pieces of the business to the key players at Berkshire. He himself has said, literally at this meeting that he thinks the Greg Abel era going forward will probably make more money for Berkshire shareholders than he would.

Dylan Lewis: Yeah, I think he said, I will remain a shareholder, and that is a financial decision.

Jim Gillies: Exactly.

Dylan Lewis: I trust the management team here. I'm glad you brought up the Apple example because Buffett gave a nod to that, too. He hit a quote, "Nobody but Steve could have created Apple. Nobody but Tim could have developed it like he has." I think you could swap out the names there, and he's essentially talking about his own business.

Jim Gillies: He is. Now, will Greg Abel overseeing Ted and Todd? Will they be able to create some of the magic that we've seen in stock picking? I think actually, that'll be a tough sell. But I also think it's a tough sell under Buffett because of the size of the company. Again, Apple has been the last real big home run. There's been a bunch of little things that haven't worked out, and that's fine, or IBM didn't work out, or the airlines didn't work out. Now, I'm of the opinion that Buffett got out of the airlines during COVID. Because when the facts change, I changed my mind. What do you do, sir? The world changed. A worldwide pandemic that shuts down air traffic for a not insignificant period of time makes those airlines worth it changes the calculus about how you calculate the fair value of those airlines. He knew they were going to need government assistance, and he also knew that the optics of having Warren Buffett one of the richest people on Earth through Berkshire Hathaway, it wasn't Warren Buffett owning them, but it was Berkshire.

The fact that Berkshire Hathaway being the largest shareholder of all of these airlines that now all of a sudden need a bailout, the optics of that are going to be pretty bad. He also knew he didn't want to be the guy bailing out the airlines. I'm going to sell my shares. That takes him off the board and takes Berkshire off the board. That way, they can qualify reasonably well for government funding and whatever you think about airlines and their perpetual need to go hand in hand with the government at every crisis. I leave that as an exercise for the listener. I think it will be an interesting play from here. I don't think, and I say this again. I know I've said I'm trying to remain respectful and giving Warren Buffett and Berkshire Hathaway have been very good to me personally. As I've mentioned, it is my largest shareholding. It is my longest held shareholding. But let us be honest. The stock picking over the past decade or so has not been spectacular aside from Apple. I would argue that is not because Warren Buffett has faded in abilities or anything. That is because this is a $1.15 trillion company with a bazillion different irons in the fires, and there's not a lot. They mentioned there was a $10 billion acquisition, as well that they passed on. My response to that, all I could think of when I heard about that over the weekend was, who cares $10 billion? A $10 billion acquisition for a company with 348 or 350 billion in dry powder. It's 3% of your cash.

Dylan Lewis: It's not material.

Jim Gillies: It's irrelevant. I don't want to hear about $10 billion acquisitions prospectively. I want to hear about minimum $100 billion prospective acquisitions. Bigger is better. How many of those companies are out there that will be available at a price that Berkshire and Buffett, and Greg Abel, and Ted and Todd would think compelling? I submit to you there ain't many, which is one reason why I think Buffett is, Oh, you know, I'll go play. He's going to go day trade.

Dylan Lewis: It's a good time for him to step away. The house is relatively tidy. He's been able to put things in pretty good shape.

What is amazing to me, taking a step back on Berkshire is sitting on record levels of cash, and we know what cash is earning right now. It's year to date up more than 10%. The market is in the opposite direction, down about 4% year to date. Investors haven't seemed to mind giving them a little bit of time to put that money to work, and they've been rewarded for their patients so far. I don't think that will change. I think anyone who's expecting anything really large is going to be waiting quite a while. I think we're going to see a capital allocation and deployment strategy that is very much like what we've seen in the past, and that might mean we're looking at three figure billion dollar of cash on the balance sheet for a long period of time.

Jim Gillies: Yeah, I think you can probably assume because they've said this. Expect that cash balance to never again drop below 50 billion. Now, when you have 350 billion.

Dylan Lewis: There's room to go down.

Jim Gillies: Oh, we can just hold that, and it's fine. I'm genuinely curious to see, and I don't think you're going to see it anytime soon. I think Buffett probably needs to ultimately exit the board fully before you'll ever see anything here. But I'm curious to see because it took about a minute and a half after the announcement before various denizens of Twitter started saying, Oh, break up Berkshire Hathaway now. It needs to be broken up, or when are they gonna pay a dividend? Calm down, folks. I think really truly, nothing is going to change. Nothing is going to change as long as Buffett is consuming oxygen. I think nothing changes. When he ultimately leaves the scene, I think nothing's going to change really for a little while longer. I think they will continue in reinvesting in their existing businesses. It wouldn't shock me to see them deploying incremental capital in some of their already existent areas. More energy. They famously talked over the past, I'll say 15-20 years about how they like businesses where they deploy significant capital at good expected returns, but that would be the railroad, and that would be a few of their other businesses where again, have the utilities. I would be shocked outside of a market dislocating event. I would be shocked to see them make any meaningful draw down of that cash hoard. I don't think they're going out and buying Disney tomorrow. I don't think they're going out, or to go out take out Hershey, or try to acquire MARs privately. They might but these are the types of businesses that would be fun to see them make a run at Coca Cola. I will say that would tickle me a little bit.

Dylan Lewis: It would fit the profile, and it would certainly fit Buffett's tastes. Yeah, I think you're right. The market may give them that dislocating moment. We've talked at length on the show about how there is a bit of a precarious situation going on.

Jim Gillies: I don't know what you're talking about.

Dylan Lewis: Buffett has provided some commentary on that, and I can't think of a better position to be in to have $350 billion in cash if you expect there may be a lot of headwinds away and there may be some discounts available to the business. You mentioned railroads. You talked about energy a little bit. Any other sectors you think might fit the profile for a Berkshire acquisition if we start seeing some things on sale.

Jim Gillies: Coca Cola would be funny, but it's also possible. I don't know how far they'd get. No, I think you want to look in a space where they already have an interest. It will not be technology motivated. It's always going to be, well, where we like to invest in places where we think we know. There's the famous story about what was the best selling candy bar in the 80s? Well, it was Snickers.

Dylan Lewis: Snickers.

Jim Gillies: What was it in the 90s? Well it was Snickers. I don't know who's going to have the dominant operating system in 20 years. You probably make a good guess.

Dylan Lewis: But people are going to still be eating Snickers.

Jim Gillies: But you're probably going to be buying Snickers, and the pricing power of a Snickers or the pricing power of a can of Coke is probably going to or a bottle of ketchup he's famously got the Kraft Heinz Association is probably going to be there. I would like to see them. It's going to be a low technology possibility. The obvious things are more insurance, more energy consumer products with a significant brand mode. A Coca Cola, I joke a little bit, even at Disney, but even Disney's there are problems if Disney were to ever be something like that. I think it's going to be interesting to see where it goes. I'm signing up for the ride. I've been signed up for the ride for a while. At the very least, I'd like to not vacate my shares while I'm still drawing a regular paycheck because I don't particularly want to hand the government a large check. As you say, it's a great place to be. It has been a great place to be in the cornerstone of my philosophy.

My investing philosophy has to have the ballast holdings in my portfolio, of which Berkshire is absolutely one. It's the largest one, as I've said. Those ballast holdings that, for me, Brookfield is another one. Some people really like Fairfax Financial. Have your ballast holdings so you can go out and do some more riskier plays. I'm not talking day trading or penny stocks, or stuff like that. But still, things that may or may not work out for you, but you've always got the ballast and just to keep you calm. Then in days when you see those market dislocations, I would really encourage people to go back and look at what Buffett was doing during the global financial crisis, the 2008 crisis. He wasn't panicking. Stock got hit along with everything else. That's fine.

Buffett has said even this weekend. We don't care about that stuff. Berkshire's fallen, I don't know how many times by 50%. Doesn't bother us in the slightest. Focus on the business, all that wonderful stuff. But remember what he did back then. Goldman Sachs came hat in hand. The vampire squid came hat in hand. Buffett said, sure, I'll help you. Here's your 15% anchor. Harley Davidson came hat in hand. Sure, we'll help you. Here's your 15% anchor. Bank of America. I think gave penny warrants or dollar warrants as part of the investment. Don't call it a bailout, as part of the investment that Buffett made in Bank of America, and there's others. That's one thing I think I want people to remember about. Buffett's got this kindly Midwestern old dude cut of persona. When it comes to allocating capital, dude's killer. You want my money, it's gonna be 15%. My end is 15 precious, and that's how we're starting, and we'll take a little bit of equity comp, as well. I hope that Greg Abel and Ted and Todd can be similarly value extractive, shall we call it, during future market dislocations, which as Buffett again, said this weekend, are coming. We don't know when they are. They will come. Probably be a Tuesday. He seems to think that the business is in good hands with Greg running it. Again, if we have trusted Buffett's process on the building of Berkshire, I would suggest to you we should be similarly trusting of his transition planning for the business that he's booking.

Dylan Lewis: Jim, it sounds like even though he won't be calling the shots for your largest holding, his tenets, his investing style, remain the pillars of your portfolio and how you expect the Berkshire will continue to be rough.

Jim Gillies: Sounds about right to me, yes.

Dylan Lewis: Jim, thanks for talking through it to me.

Jim Gillies: Thank you, Dylan.

Dylan Lewis: As always, people on the program may have interests in the stocks they talk about and Motley Fool make formal recommendations for or against. So far it's I think based on what you hear. All personal finance content follow Motley fool editorial standards is not approved by advertisers. Advertisements are sponsored content, provided for informational purposes only. See our full advertising disclosure. Check out our show notes for the Motley Fool Money team. I'm Dylan Lewis. We'll be back tomorrow.

Bank of America is an advertising partner of Motley Fool Money. Dylan Lewis has no position in any of the stocks mentioned. Jim Gillies has positions in Apple, Berkshire Hathaway, and Brookfield Asset Management. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Brookfield Asset Management, Fairfax Financial, Goldman Sachs Group, Hershey, International Business Machines, and Walt Disney. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.

The risk has been increasing that the United States will have a recession in 2025 or within the next year, according to top Wall Street firms and economists. Recession risk has risen sharply over the last few months, largely due to the trade war and the potential for tariffs to hurt U.S. (and global) economic growth and ignite inflation.

Below I'll explore the current probability of a near-term recession and what stocks could hold up best during the next recession.

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What's the probability of a near-term recession in the United States?

Many of the probability estimates from experts that the U.S. will have a recession in 2025 or within one year fall within the 40% to 60% range, though there are some credible sources with estimates that are lower and higher. In early April, Wall Street company Goldman Sachs boosted its one-year recession-risk probability to 45% from 35%, which it had previously increased from 20% in late March.

Also in early April, JPMorgan pegged the odds of a U.S. recession in 2025 at 60%, up from its early March forecast of 40%. In mid-April, the investment bank reiterated its 60% probability. It said that President Donald Trump's 90-day pause on his April 2 country-specific so-called reciprocal tariffs "reduces the shock to the global trading order, but the remaining universal 10% tariff is still a material threat to growth, and the 145% tariff on China keeps the probability of a recession at 60%."

Which categories of stocks should hold up best during the next recession?

Certain categories of stocks tend to perform better than others during economic downturns. These mostly include what are called "defensive stocks" that tend to pay dividends.

Defensive stocks include several broad classes, including:

• Stocks of companies that make products or provide services that people need no matter the economic climate.
• Gold and silver mining stocks. Precious metals are considered hedges on inflation and the relative value of the U.S. dollar, which generally weakens during recessions.

Examples of the first group listed above include:

• Consumer staples: Food and beverage makers, personal and home care products manufacturers.
• Utilities: Water, electric, and gas utilities.
• Healthcare: Pharmaceutical makers, medical-device makers.
• Discount retailers: In tough economic times, many consumers tend to be more price-conscious.

There are other types of stocks that tend to weather recessions well. You can think of one group as "small indulgence stocks."

During economic downturns, many people will feel uncertain about their job security. As a result, they'll put off large expenditures, such as homes and new vehicles, and cut back their spending on discretionary items, such as clothing.

However, many folks will keep spending on what they consider relatively inexpensive "treats." Some might even increase their spending on such products or services to reward themselves for putting off spending on big-ticket items.

Examples of "small indulgence" products and services include relatively inexpensive:

• Entertainment, such as video-streaming
• Comfort foods (such as chocolates), meals out (fast-food restaurants)

What stocks gained or held up relatively well during the Great Recession?

All recessions are somewhat different, so it's not possible to say that just because select stocks held up well during prior recessions, they'll hold up well in future ones. That said, in general, certain types of stocks tend to perform better than others during tough economic climates, as discussed above, so investors can learn valuable lessons by looking at past recessions.

The Great Recession was a deep economic downturn that officially lasted for 18 months from Dec. 2007 through the end of May 2009. It's widely considered the most severe U.S. economic downturn since the Great Depression, which began following the stock market crash in 1929 and didn't end until the start of World War II in 1940.

During the one-and-a-half years of the Great Recession, the S&P 500 index, including dividends, plunged 35.6%.

Table 1: Stocks that gained during the Great Recession

These stocks and one exchange-traded fund (ETF) are listed in order of descending performance during the Great Recession. This list isn't all-inclusive.

Company	Market Cap	Dividend Yield	Wall Street's Projected 5-Year Annualized EPS Growth	Return During Great Recession	Return From Start of Great Recession to Present*
Netflix (NASDAQ: NFLX)	$469 billion	--	23.6%	70.7%	33,280%
iShares Gold Trust ETF	$41.9 billion net assets	--	--	24.3%	302%
J&J Snack Foods	$2.5 billion	2.4%	9.1%	18.1%	404%
Walmart	$762 billion	1%	9.5%	7.3%	761%
McDonald's	$226 billion	2.2%	7.6%	4.7%	778%
S&P 500 index	--	1.36%	--	(35.6%)	424%

Data sources: Yahoo! Finance, finviz.com and YCharts. Data to Friday, April 25, 2025. EPS = earnings per share. *Bold-faced returns = stock has beaten the S&P 500.

• Netflix: Video-streaming pioneer that's the world's leading video-streaming company.
• iShares Gold Trust ETF: Exchange-traded fund that aims to track the price of gold.
• J&J Snack Foods: Produces niche snack foods and frozen beverages.
• Walmart: World's largest retailer by revenue, focuses on low prices.
• McDonald's: World's largest fast-food restaurant chain by revenue.

Table 2: Stocks that held up relatively well during the Great Recession

The following stocks declined during the Great Recession but held up much better than the broader market, which dropped nearly 36%. This list isn't all-inclusive.

Company	Market Cap	Dividend Yield	Wall Street's Projected 5-Year Annualized EPS Growth	Return During Great Recession	Return From Start of Great Recession to Present*
Newmont	$60.8 billion	1.8%	7.2%	(0.3%)	54.5%
Hershey (NYSE: HSY)	$33.1 billion	3.4%	(7.4%)	(7.2%)	524%
Church & Dwight (NYSE: CHD)	$24.4 billion	1.2%	7.4%	(9.6%)	792%
American Water Works (NYSE: AWK)	$28.1 billion	2.1%	6.5%	(12.7%)*	953%
NextEra Energy (NYSE: NEE)	$136 billion	3.4%	8.2%	(15.7%)	531%
S&P 500 index	--	1.36%	--	(35.6%)	424%

Data sources: Yahoo! Finance, finviz.com, and YCharts. Data to Friday, April 25, 2025. EPS = earnings per share. *Bold-faced returns = stock has beaten the S&P 500. **Company went public in April 2008, a few months after the recession started.

• Newmont: World's largest gold mining company, which also mines other metals.
• Hershey: Largest chocolate company in the U.S. by market share, also sells salty snack foods.
• Church & Dwight: Home and personal-care product maker, best known for its iconic Arm and Hammer brand baking soda.
• American Water Works: The largest and most geographically diverse regulated U.S. water and wastewater utility.
• NextEra Energy: Largest electric utility in the U.S. by market cap and the world's largest generator of renewable energy from wind and sun.

Key takeaways from the above 2 tables

1. Gold mining stocks (Newmont, Table 2) and gold ETFs (iShares Gold Trust ETF, Table 1) might hold up well or even make strong gains during tough economic climates, but they rarely perform well during booming economic times. Therefore, they tend to underperform the market over the long term. These investments are highly volatile and cyclical and best left to short-term traders.

2. Netflix and Hershey are good examples of "small indulgence stocks," as described above. Moreover, Netflix has an added benefit that wasn't an issue during the Great Recession: It should be little affected by the raging tariff war, as U.S tariffs on imports and other countries' retaliatory tariffs are on goods, not services. This is an important distinction that investors should keep in mind when selecting stocks.

3. Top utility stocks can outperform the market over the long term, despite conventional wisdom to the contrary. (Cases in point: American Water Works and NextEra Energy, Table 2.) These stocks aren't just "widow and orphan stocks," as stockbrokers, in general, have long characterized them. A statistic that might surprise many investors: As of April 25, shares of Google parent Alphabet have performed only slightly better than shares of American Water since the latter's initial public offering (IPO) 17 years ago in April 2008: GOOGL has returned 1,090% to AWK's 953%.

4. There are some top-performing stocks that get very little coverage in the financial press. (Case in point: Church & Dwight, Table 2). One takeaway here is that investors shouldn't conflate the amount of coverage a stock gets in the financial press with its desirability as an investment, especially a long-term investment.

Review your stock holdings -- but stay in the market

As noted in this article's opening, top Wall Street banks and economists generally give odds ranging from 40% to 60% that the U.S. will have a recession in 2025 or within the next year. These are quite high odds, so it makes sense that investors review their stock portfolio and perhaps tweak it to make it more recession-resistant.

That said, if you're a long-term investor, it's not a good idea to get out of the stock market entirely or make huge changes, such as selling all of your growth stocks. It's extremely difficult to time the market. If you sell your growth stocks that don't tend to do well during recessions (such as tech stocks), you'll risk missing the early stages of their upturns during the next bull market -- and the early stages of a sustained upturn tend to be strong.

Time is a long-term investor's friend. Over the long term, the direction of the U.S. stock market has been decisively up. The longer your investing time frame, the less concerned you need to be about recessions causing market downturns.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of Motley Fool Money. Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Goldman Sachs Group, Hershey, JPMorgan Chase, Netflix, NextEra Energy, and Walmart. The Motley Fool has a disclosure policy.