We're looking out at 2025 and gazing into our crystal ball. This week's Motleyful Money Radio Show starts now. Everybody needs money. That's why they call it money.
From Fool Global Headquarters, this is Motley Fool Money. It's The Motley Fool Money Radio Show. I'm Dylan Lewis. Joining me over the airwaves, Motley Fool senior analyst Ron Gross and Asit Sharma. Fool's. Great to have you both here. How you doing, Dylan? Great to be here, Dylan.
We are looking at our 2025 preview show. We're going to be checking out the industries we are watching for the new year for good reasons. The executives we have our eyes on for bad reasons. And we're going to get a cautionary note on forecasts from best-selling author Morgan Haussel to help send us into the new year.
Gents, in order to know where we're going, I think we need to start out with where we are. As we check in towards the end of the year, it has been a stellar two-year run for the S&P 500 after a rough 2022 run. Historically, the market is up two out of every three years. We've seen that over the last three years. What is the outlook for 2025?
Well, Dylan, let's look at the last two years. As you said, the market's S&P 500 is up 28% approximately, including the evidence this year. Last year, up 26%. Dylan, if you like making money, it's been pretty exciting. I love making money. So it's been two really solid years. And despite some recent market weakness, especially in the Dow over the last couple of weeks, I think there is strong momentum heading into the new year, but
Following those two really strong years, as you point out, I think investors may need to dampen expectations when it comes to another year of outsized gains. I saw a study over at Charles Schwab that said, perhaps we should expect returns of around 5.8%. I know that's kind of specific, taking it out to the decimal point. Let's call it 6%.
up 6% in 2025, so less than the historic average of 9% or 10%, but I'll take three years in a row of an upmarket. Another study I saw, only two out of 20 major investment firms see the market declining in 2025.
So unless you're a contrarian and you think they don't know what they're doing, that's another good data point. The average of all those firms, a seasoned S&P 500 increasing at about a 7% rate from current levels. So I think we're setting ourselves up for a good year. We'll watch lots of different economic news come out as we always do. But I think here as we sit going into the new year, we look pretty good.
I'm not going to ask either of you for a market call, certainly not to the specificity of the tense digit of percentage. But I do want to play a little bit with the idea because we have seen some good years recently. We also have some concerns in the market around valuations, especially among some of the bigger tech companies. What do you think the market is going to need to see to keep things moving along and have a good year for investors?
Dylan, first of all, I want to say that I'm not a contrarian, but I don't think those guys know what they're doing. Just get that out of the way. But I think what the market wants to see is earnings growth. This has been a pretty good year following last year's appreciation as Ron pointed out. Two years in a row where we're averaging 26, 27%. Part of the story is GDP growth. GDP is healthy.
This year, the U.S. economy in the last couple of quarters has grown at almost a 3% clip year over year. And that economic activity favors companies that are increasing their earnings, watching the costs on the bottom line, finding new markets to perform in.
According to Lipper Insight, about 76% of companies in the S&P 500 reported earnings that were above analyst expectations in this last quarter. That's well above a historical average of about 67%. You can see how companies' performance is the fuel that lets investors be positive and keep putting money into the game. I think we're going to need to see this coming up. I also think we're going to see
or need to see a little bit of continued big tech leadership. Now, it's clear that huge companies, the Amazon's of the world, meta, other companies that we associate with leading this charge of AI and technology advancement have
produced part of this market upsurge, but they don't need to keep outperforming. The problem that will encounter as investors is if these companies start going into reverse. I don't think they will, but I think we're going to need to see Big Tech show up just a little bit and keep some realistic earnings growth on the table.
And then finally, I think maybe we need some thematic performance. I mean, who would have thought that energy would be an AI play in 2024? We'll need a good story in 2025, and we will also need just a little more appreciation for solid retail companies and industrial plays. Put all that together, and I think we can still get an eking out of that 6% or so, maybe a little higher, a little lower in 2025.
So far, I have been asking all the questions. I'm going to turn it to you both. I asked you to come with your question for the market in 2025. Ron, what are you asking? Yeah, I think I said nailed it when he talked about earnings. I want to see ultimately how corporate profits fare in 2025. That's almost always going to be my answer, by the way. That and maybe a little interest rates thrown in for good measure because those are the really two big things that will drive prices.
Goldman Sachs sees corporate profits jumping about 11% in 2025. GDP at around 2.5%. I think that again sets us up for a pretty good year. On December 18th, we saw the Fed do their third consecutive rate cut. They did indicate that rate cuts in 2025 and forward would be slower. So we have to temper our expectations there a little bit. But I do think we'll continue to see at least several more industry cuts over the next two years, two and a half years.
So corporate earnings, earnings interest rates coming down again sets us up for a pretty good situation in the market. One prediction I feel pretty strong on, the Fed speculation is not going to end in 2025. I feel like we have entered peak Fed and no matter what happens near term with interest rate policy, we're going to have a lot of people watching, a lot of people speculating as we look out to some of the later quarters of the year. What's your big question for the market in 2025?
So my question for the market is, hey, market, are you ready for the consequences of being the only game in town? It's been interesting to watch the explosion of multi trillion dollar companies by market capitalization in the US. The United States is such a big market compared to the rest of the world. Companies on US markets now represent about 70% of the total market capitalization on this globe. So there's lots of capital that still flows here.
And this is a great thing because that funds innovation in our public sector. It helps companies raise capital, invest in new technologies. But there's a flip side of that as well. We're getting really concentrated here. So I get a little nervous sometimes at night at the potential cost of being number one. So market, what are you going to do with that? How are you going to prepare for that going forward?
Dylan, real quick, I just want to say, even though I think we're setting ourselves up for a good 2025, the market's not cheap. And we should prepare now for what we're going to do when we see a 10% correction, which will happen at some point, very possibly in 2025. Think about it now. So when it actually happens, you're not surprised. You know what you're going to do. By all means, do not panic. That is number one, but prepare yourself now and then it won't be a surprise.
you couldn't have teed me up better, Ron. I think one of the things that we'd like to do as part of that prep process and knowing how you're going to be handling those situations is having some themes, having some industries, having some ideas for where you may put capital to work as we see some of those market dips. Osut, what is a space that you are excited to follow in 2025 and maybe could consider putting some cash to work in?
Well, this is interesting, Dylan, because I've been talking about this sector for about three years now, saying maybe two to three years time, we might have some investable ideas in this space. And it is the electric vertical takeoff and landing industry. Now that's a mouthful, but essentially an easy way to visualize this is electric air taxis. That's the most commercial use of this technology. We're seeing leading US companies that are small in this space, like Joby and Archer Aviation raise significant capital. They've got investments from
airlines, auto manufacturers, and they're nearing the production of commercial aircraft. Both have contracts from the US military to boot. But there are other players in the space, and I've seen in the past year, some big aerospace companies like Honeywell, which is a great example, start to
direct a little bit of R&D and technology into this space, understanding that we will soon be at the point where we have certifications here in the US and around the globe for these electric air taxis. So I think this is going to be a fun one for me to watch in 2025.
Ron, if memory serves when we did our 2024 preview, gene companies were one of your focus zones for this year. What are you looking at for next year? I do continue to watch gene therapy companies for sure. A few themes here for me. I think investors should continue to broaden that exposure beyond just the large mega.
cap tech companies, the RSP equal weight S&P 500 ETF is an easy way to do that. I do like small caps here. They're helped by interest rates that are falling. And I think dividend stocks look interesting here with high-flying tech stocks looking pretty expensive and interest rates coming down that could potentially put a dent in the appeal of bonds and other alternatives to dividend yields. So I'd look for some high quality dividend stocks as well.
All right, we're going to keep looking forward after the break. Up next, we've got the leaders that are in the hot seat in 2024 and some comebacks that we're looking forward to. Stay right here. You're listening to Motleyful Money.
Welcome back to Motleyful Money. I'm Dylan Lewis here on air with Asa Sharma and Ron Gross. We're recapping 2024 and we spent a lot of our last segment with a fairly rosy outlook. Strong recent market returns. The corners of the market we are excited to watch next year.
Now we're going to flip things around a little bit and talk about some dogs. 2024, not a great year for everyone. Some business is struggling. And when that happens, when businesses hit a snag, usually management is the one answering the call. Ron, who is your CEO on a hot seat heading into 2025?
I think I'm going to go with Southwest CEO Bob Jordan, who became CEO in 2022. Just recently, in October, Southwest settled a proxy fight with activist investor Elliot Investment Management, which had basically been pushing to get rid of Jordan. The settlement has saved his job for now, but it's left him facing pressure to improve
the airline's financial results, which are really struggling. As part of the deal, Elliot will get to nominate five nominees to the board. Other concessions like the executive chairman Gary Kelly will accelerate his retirement to next month. But now Bob Jordan has to deliver on the turnaround strategy. Increase efficiency, lower costs, booster revenue. They're working on the assigned seats now versus the free for all of Southwest of the past.
premium bookings to bring in additional revenue. It's not gonna be the easiest job to turn this. So he is for sure on the hot seat. He's got a little time. He's bought himself some time here. I think you're probably boosting the probability of being right by focusing on a business that already has activists in the mix and paying attention rather than one that has one swimming around, maybe interested, but hasn't made a move yet. Exactly. Osset, what about you? Who do you see as someone who has a chair that's a little warm in 2025?
Well, Dylan, can I first say congrats to all the companies that have underperformed this year that already have new CEOs and made those seats super hot? I mean, look at Boeing, which has a new ish CEO Nike Intel, which doesn't have a CEO, but they have cleared the seat. But let's focus on one that a company that has a lot of promise is really underperformed this year. And that's Moderna.
down 60% this year. So I am going to have to turn up the heat on celebrated CEO Stefan Bonsell. Now, Bonsell has led Moderna through its R&D phase into a company that is bona fide competitor to other companies that produce vaccines in the market. Their mRNA technology has been proven as a really great solution to disease states that just rise up. Hence, they made a lot of money during the pandemic with their COVID vaccine.
But now sales have dipped, R&D spend is still very high, about $4.5 billion annually. Given this and a longer timeline to become profitable, and you have really what's turning into a situation where investors want to give bond sell all the credit for leading this company to where it is today.
also wants some returns on their investments. So I think this makes it very difficult. He unfortunately took over a sales oversight position last year when a commercial officer left and finally decided to relinquish that, maybe put a little bit too much on his plate. But I think Moderna really has to come to terms with how it's going to be profitable in the coming years. And he's got to figure this out.
2025 might really be a warm year. Climate change might affect the CEO if he can't change its fortunes pretty soon. To your point on returns, Osut, I think if you were to rewind the clock to 2020 and say, Moderna, what are your expectations for this business? Especially as we saw some of the vaccines come out, you'd say, I have pretty high hopes for a company like this. You go back to the beginning of 2023, S&P 500, total return basis, up over 60%.
Moderna down 78% since that time. So that is more than 100% difference in performance, which is really, really hard to do. It's so hard. And this is the price of being good at something.
The waves aren't always linear. Your performance isn't always predicated on just a step-by-step function. Sometimes you have to go out and take risks, and Moderna is great at doing that. I'm not saying that they won't be a wonderful company in the future. I think their technology is superior to so many competitors, but it's going to take time for this long thesis to play out. Unfortunately, investors are an impatient bunch.
All right, so leadership at Moderna, hoping to turn things around. I wanna know who you guys are expecting will turn things around. Ron, what is your comeback story to watch in 2025? I think Lululemon is a potentially interesting comeback story. Shares are down about 25% this year as the high-end athleisure retailer has struggled. As an aside Dylan, I hate the word athleisure and you should too. But you just used it. But I digress.
Lulu has really been seeing a lot of competition out there. And the slowdown in the higher price points because consumers have, quite frankly, been pretty cautious. So you've got competitors like Alo and VRE, Fabletics, that are somewhat more reasonably priced, not always, but in some cases. And the high price points have been the sticking point with consumers. Lack of product newness has also been a problem for Lulu.
They had a new launch of breeze through leggings, and it basically failed right out of the gate. I think the brand power remains intact. I love stories with strong brands that are somehow struggling. I think they have some encouraging results in the latest quarter. Revenue is up 9%. Comp sales are up 4%. They're making progress in their turnaround play.
26 times does not look cheap to me, but that's because their earnings are depressed. If they get the act together, I think you start to see the stock look a little bit more reasonably priced. Awesome. When you look out at the market, who do you think will be saying, don't call it a comeback in 2025?
It's got to be AMD, Dylan. And not because I talk about this company a lot, but look at this. AMD shares are down 15% year to date. As Ron told us, the market's up about 26%. That's over 40% delta in performance. And how can this be for a company that's projected to triple its cash flows in the next four years? Well, it's the expectations game. I think investors are unfairly comparing AMD's potential in the GPU space vis-a-vis training for AI against its worthy competitor.
Titan competitor NVIDIA. There's so many other applications that AMD is gaining a foothold in from dislodging Intel as the best seller of CPUs in the data center this year to inference-based solutions. It's a much cheaper option for companies that want cheap compute for when we ask chat TPT a question.
And Oracle, for one, is a customer that stepped forward to support that. And just the explosion of on-device AI that we're going to see in the future, which plays right into AMD's sweet spot as a provider of chips that go in phones, more laptops and industrial devices. But we see them across different types of devices, plus Lisa Sue, who was just named an incredible entrepreneur of this year. So I think
Going forward, when we get to December of 2025, we'll be able to look back and say, wow, investors really realized and appreciated that value proposition from AMD. I think what you have to like about AMD is to your point, it's a business that's struggling, but the leadership in place is a leadership team that you like. Absolutely. And they're fierce competitors, they're smart, and they never sleep, apparently. So I think they'll get this.
All right, we're going to head to a quick break. Coming up next, we've got a note on forecasts, a cautionary note to keep in mind as we look forward. Stay right here. You're listening to Mouthful Money.
Welcome back to Motleyful Money, I'm Dylan Lewis. This time of year, investors are getting forecasts galore. What will the market return? Where will interest rates go? Which CEO is on the hot seat? It's true. Even I can't resist a forward-looking conversation and some speculation.
The truth is, we don't know. For a reminder of that, as we look forward to 2025, this week we're revisiting a conversation from our annual member event, Foolfest 2024. They're my colleague, Robert Brokamp, interviewed best-selling author and longtime fool, Morgan Haussel, about his latest book, Same As Ever, The Things That Indoor, and The Follies of Following Forecasts.
So one of the things you wrote about your book, in your book, and it's kind of the foundation of the book is that about a decade ago, you decided you're going to read more about history, read less about forecasts, and you said it was one of the most enlightened choices that you made. Tell us about that.
Well, a lot of it just came from when my time as a Motleyful writer, just spending that much time with the financial media, whether it was CNBC or various blogs and whatnot, how bad the forecasting track record is. And it is abysmal. And I'm not talking stock picking. I'm talking to people saying, oh, the next recession is going to start in June, or the stock market's going to go down 7% this year. That kind of forecasting, the track record, over time for the last century is as bad as you can possibly imagine.
It's terrible, but we keep doing it over and over and over again. So I very quickly said, I don't want anything to do with that. If I'm going to write about finance, I do not want to do this thing that everyone else seems to gravitate towards that has such a terrible track record. But I always, as many of you are, just an amateur student of history. And what was always so interesting to me about the history of economics and investing was, if you read about what happened in the Great Depression in the 1930s, or some of the depressions of the 1870s,
People reacted exactly the same back then as they do today. The behaviors of the economy, how people respond, agree, and fear, and risk never change. It's been the same forever. And therefore, you can say it's probably going to be the same in the future, too. If people responded to the financial crisis of 2008, the exact same way that they did the Great Depression in 1929, you know how they're going to respond to the next one whenever it might occur.
So rather than doing the futile effort of saying when's the next bear market, when's the next recession, I just thought it was fun and interesting to say like, well, how do people respond to it? Let's focus on that. And then whenever it comes, whenever it might come, you'll have a better understanding of what is timeless rather than fooling yourself into thinking that you can predict the changes. So it's difficult to predict those changes.
But yet we still have to make some predictions. Every investment to a certain degree is absolutely, I think this investment is going to be worth more than this other investment. Whereas me as a financial planner, if I want to help someone look at their retirement planning, use a retirement calculator, I have to use some predictions about
inflation, tax rates, what the stock market will return. So how do you do those types of predictions when you still have to make some sort of forecast? I think there's two ways to think about it. One is what I would call just a good enough forecast, which is, OK, so if you're thinking about recessions, rather than saying, oh, let's look at all the different variables in the economy and try to predict whether it's going to happen this year or next year, nobody can do that. But if you said, look, historically, over the last century, there have been, on average, two recessions per decade.
one of which is usually pretty bad. And I expect that to be the case going forward. That's not a forecast. It's just like a baseline expectation of what you are likely to experience as a baseline. Maybe it's better. Maybe it's worse than that. But it's a good baseline. I think that's a good enough forecast. And so that's one way to think about it. The other is the idea that every stock market valuation
is a number from today multiplied by a story about tomorrow. That's how you get every valuation, a number like earnings multiplied by a story of what the future might entail, good or bad. And I think if you think about it in those two buckets, the story about tomorrow is almost impossible for anyone to predict. And that's what makes forecasting what the stock market's going to do so difficult. Because really what the story is is what kind of moods are people going to be in.
Are they going to be optimistic? Are they going to be pessimistic? And if you phrased it as, look, if someone's on CNBC and they say, I think the stock market's going to go up 12% next year, that sounds reasonable. But if somebody came on and said, I think next December, people are going to be in a 12% better mood than they are today, that's ridiculous.
But that's what they're doing. And so I think when you are making a specific forecast, just breaking it up into buckets of what is knowable and what is clearly not. And if you're focusing on the number from today, the quality of the business, the quality of the management team, whatnot, that's something worth paying attention to. The story about tomorrow is always going to be this nebulous factor that no one can really wrap their heads around.
focusing on things that never change. But you do talk about in the book how sometimes things do change. And you have to keep an eye on that. You highlight Sears, for example. That was a company that was many of us remember from when we were younger. Used to be on top of the world and now it's just a shadow of itself. So how do you distinguish between looking at something and thinking, OK, this might change versus something that, no, this is permanent. This is going to be a part of human nature for a really long time.
Here's what's really interesting. Benjamin Graham, who was Warren Buffett's early mentor, he's like the godfather of value investing. And he taught Warren Buffett basically everything that he knows. He wrote the most famous investing book of all time, called The Intelligent Investor. He first published it in 1941 or thereabouts. And it still sells today hundreds of thousands of copies per year. It's one of the best-selling investing books ever written. It's like the Bible of value investing. Benjamin Graham died in, I think, 1976.
And the last interview that he gave, he was asked whether he still agreed with a lot of what was put in the Intelligent Master. And whether he still believed that picking individual stocks as he laid out that you should do was still viable. And he said, no. Because the world had changed so much. And that was in the 1970s. Like, what would he be saying today?
Now, there's a lot of timeless wisdom in that book, which is why it's still worth reading. But what was so great about Graham is that he wasn't just an academic, although he was. He was a professor and one of the best, but he was actually a hedge fund manager as well. So he was very practical in what he was doing. He was not just a theorist.
And actually, I think there were six editions of the intelligent investor that were published. And every single edition, he updated the formulas that he recommend you use. So one of them would say, I'm making this up. It would be something like, buy stocks for less than 1.5 times book value. I'm making that. But it was a formula like that. And then in the next edition, he would say, that doesn't work anymore. Use this formula. And three years later, he would say, that doesn't work anymore. Use this one.
And so even though his book is rooted in timeless wisdom, he was practical enough to understand when the world changed. To such a degree that before he died, he said the foundation of his book wasn't even valid anymore. But I think that was why he was so successful. I think a lot of people get so wedded to their ideas and their identity is tied up in those ideas that they become attached to a philosophy that was very valid 10 or 20 years ago. That isn't anymore because the world changed.
And there are so many investing careers that get wrapped up in that. I think it's most common with value investors, who there were periods in the 70s and 80s and 90s where it just worked so ridiculously well. If you just bought the cheapest basket of stock, you destroyed everybody. It was so good. And then the world changed. And of course, as a philosophy, you can still work. But as a practical matter, it doesn't work nearly as well as it used to.
So understanding what is timeless, which in my views are the behaviors, and understand what changes, which is the technical details of the world, is a great quote from Voltaire who said, history never repeats itself, but man always does. I think that applies to so much, has to politics, to war, to investing. I think that's how I think about it. Benjamin Graham was famous for talking about a margin of safety.
mostly in terms of when you're picking a stock. And one of the quotes from your book you mentioned from Benjamin Graham was that the purpose of the margin of safety is to render the forecast unnecessary. But there's a personal margin of safety as well. And you quoted entrepreneur Naval, Revatnik is saying, in 1,000 parallel universes, you want to make sure you're wealthy and 999 of them.
Tell us what you think that means and maybe what you've done personally to build that margin of safety into your life. I think it's impossible to know when you see someone who is very successful, like a billionaire, how much of that was truly foresight, skill, and how much was luck. And there's a great quote from Daniel Kahneman, one of the greatest psychologists died not too long ago, where he said, without exception, the higher degree of success, the more that luck played a role.
And it's not to say that luck played the only role, although sometimes that's the case. But you never know what the balance is. Is it 10%? Was it 50%? You have no idea. And then so when you're thinking about what to do in the future, particularly when you're looking up to, oh, how did Steve Jobs do it? How did Warren Buffett do it? Let's try to emulate what they did. Well, what can you emulate and what can you not? Buffett himself has said that most of his returns, not in dollar amount, but the percentage returns that he earned,
came from the 1950s to the 1970s. That's when he was literally earning like 80% per year for decades on end. And that's the bulk of his success came during this period. And he has said that was just a very specific period in time when the strategies that he was implementing, he was just picking up free money off the ground. But it's not like that anymore.
So when you look at Buffett, there's a lot that you can learn from him and say, I want to learn about his patience, his endurance, but I can't emulate the market conditions that he had in the 1950s, and he can't. And so it's just picking out, like, look, if you had 1,000 parallel universes, what would you want to do to try to be at least decently successful in all of them, rather than attaching to something that may have just been specific to a period in time?
Part of that gets to having a certain amount of humility about your own success, looking at other people, their circumstances, and maybe not being overconfident. When you talk about overconfidence quite a bit in one of your podcasts, you said that you think one of the reasons that professional money managers underperform the market may be because of overconfidence. It tracks so many smart people, and they might be too smart for their own good. I think the line you used is that there's a fine line between intellectual rigor
and believing your own bullshit. So which Motleyful analyst do you think that describes the most?
That's kidding, kidding, although I have ideas. I think investing is one of the very few fields in life where the harder you try, it's likely the worse you will do. There's so much evidence for that. But it's not like that in almost any other endeavor in life. If you want to be in good physical shape, you've got to work hard. You've got to sweat. And investing, there's just so much evidence that the people who do best are the ones who just leave it alone.
It turned out the story is not true. This is apocryphal. But there was a great story. I wish it were true because it's so good. And it probably would be true if they actually did it, that fidelity ran a study. And they learned that the people who earned the highest returns of their client base were the ones who were dead.
because they stopped trading in and out. It's not a recommendation. We want you to stay alive. And look, it turned out, and I used to, I think I told that story at a Motley Fool event a decade ago, and at the time I thought it was true. It turned out it's apocable, but it probably would be true if they ran it, where the people who are just not pulling the levers or leaving it alone and letting it go earn the highest returns. Here's one example of that. The Dow Jones Industrial Average is 30 stocks.
But stocks come and go out of that. There's a committee that kicks this stock out, brings this one in. Jeremy Siegel, who's a professor at Wharton, he did this study years ago where he said, what if there were no committee selecting what gets kicked out and what gets brought in? What would that hypothetical Dow that was truly just set in 1950 and they left alone? It's like two percentage points, higher returns. So even in a passive index, there's still activity. But if you look at what would happen if there were no activity, it's better.
And there are so many cases in the DA where they kick out a company just before it's about to explode. And they bring in a company just before it's about to fall 80%. And so there's so many examples of this in investing where the less effort you put in, the better you do. And that's why investing is one of the only industries where you have novices, with no financial background, no experience that beat the pants off of the best Harvard-trained MBAs who work in Goldman Sachs.
Because when you have a PhD in physics and you go work at a hedge fund, you can't show up to the office every morning and say, I'm not going to make any changes today. You have to put your big brain to work. And so you see this with individual investors, too, where, and I'm sure there are people in this room, but historically, there have been studies that show this, the individual investors who perform the worst. Some people in this room aren't going to like this. Doctors and engineers.
Because those are the people who assume, and it's very natural and innocent to assume, that if you are very smart in one domain, that that will transfer over into other domains. And so you use your intelligence to try to come up with a better trading formula that I'm almost always backfires. Coming up after the break, Ron and Asit put their big brains to work and return with me to talk through stocks on their radar. Stay right here. You're listening to Motleyful Money.
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 if I saw anything based solely on what you hear, all personal finance content follows Motley Fool editorial standards. It's not approved by advertisers. Motley Fool only picks products they'd personally recommend to friends like you. I'm Dylan Lewis, joined again by Asa Sharma and Ron Gross. We're previewing 2025 for investors with the cautious note.
that we don't know. We're just trying to prepare for what is possible. Make sure that people have a good sense. One might be coming down the pike in 2025. And on that note, one of my favorite discussions for the show as we look ahead, the reckless prediction segment. I am going to kick to you both for something that has a shred of possibility, a minute shred of possibility in 2025. Asa, you're up first. What is your reckless prediction?
My reckless prediction, Dylan, is that quantum computing investing is going to go mainstream in 2025. Yes, there are no stocks that are currently making money in quantum computing. Yes, Alphabet had a great breakthrough on its own in, yes, IBM and other giants like Microsoft are investing heavily into this space.
But the truth of the matter is we are going to all get a little more familiar with the terms that surround this discipline. And I think you'll see people start to take some nibbles at some stocks that admittedly already look like they're in a bubble. But we will be a little more conversant by this time next year, just as we had a vocabulary learning curve with a lot of AI terminology. Ron, what about you? What are you giving a chance of happening?
So M&A activity, especially mega deals under the Trump administration, will increase significantly as regulations decrease and antitrust concerns get perhaps somewhat de-emphasized. Now that's a prediction, but it's not so reckless. It's probably gonna come to pass. The reckless prediction is that $436 billion cost go will acquire $60 billion target to take on both Walmart and Amazon.
When you put them in those numbers and give the market cap, it does not sound nearly as crazy as Just Point Blank saying Costco will buy Target Ron. Target could just be fulfillment centers for Costco to take on Amazon. You never know. Increase the footprint real quick. I think we get this done. Target's undervalued. It is a bit of a turnaround, but it's undervalued. Let's get this done, Costco.
You just made a target executive very sad somewhere. And somewhere COSCO executive is waving a cigar saying, hey, get that gross guy on the phone. Munger always said, if COSCO wanted to, they could go after Amazon. We haven't seen it yet though. Hey, maybe it'll happen. All right, let's get over to stocks on our radar. Our man behind the glass, Rick Engdahl is going to hit you with a question. Aset, you're up first. What are you looking at this week?
So I'm looking at a company called Marvell Technology. This is a company that plays in the AI space. It's a semiconductor play that is all over the place. It works in 5G. It works in the enterprise data center. But what's very interesting is the capital requirements for this company are relatively small. So we're starting to see its revenue scaled.
Marvel has appreciated a lot this year, like 86% Dylan, but I was talking about AMD tripling its cash flows in four years. How about tripling cash flow in the next three years? Those are the projections for Marvel. It's hit my radar in a big way, but wait into this carefully, folks. Rick, a question about Marvel ticker, M-R-V-L. Yeah, sorry. I wasn't quite paying attention. What do you think is the next big blockbuster coming out of Marvel? Do you think they're going to reboot Spider-Man again or?
I'm not sure what they're going to do, but being the semiconductor industry, you can be sure that it is very sequel-based. They're not going to take a lot of risks. They're going to do it. They do well, and there's going to be heavy marketing associations. Do they use SQL servers or SQL? Never mind. Actually, they do play in the storage space. Believe it or not. Wow.
Tough bit to beat there, Ron. What are you looking at this week? What is on your radar? I'm taking a look at a company that Rick has never heard of. Undava, D-A-V-A, following a re-recommendation by my colleague, Richard Griefner, over at our Value Hunter service.
Andava is a UK-based IT services provider that helps clients implement next-generation technology like cloud computing. CEO owns 14.5% of the company. Now, demand for their services surged during the pandemic, but it has dried up recently due to things like higher interest rates and economic uncertainty.
The thesis is that that should only be a matter of time until their pipeline converts into higher earnings, and hopefully that will then convert to a higher share price. Rick, a question about Endava, ticker D-A-V-A. You're right, I haven't heard of it, but I looked at their website and it says that they consult and partner with customers to create technological solutions that drive innovation and transform businesses. So how necessary is this company? It's extremely critical.
Rick, it sounds like you're going with chips one, two, three, four, and five, the entire cinematic universe. Is that right? I think so. I think so. All right, Asit Ron, thanks for bringing your radar stocks and being with me here all year. That's going to do it for this week's about the money radio show. Show is mixed by Rick Engdahl. I'm Dylan Lewis. Thanks for listening. We'll see you next year.
