The Challenges of the China Market

**Tyler Crowe** (0:02)
The Challenge of China's Market today on Motley Fool Hidden Gems Investing.
Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime pool contributors, Matt Frankel and Jon Quast. So we're gonna really dive into the challenge that a lot of companies have been facing in China recently. We discussed it yesterday on the yesterday's podcast related to Nike's earnings. We're gonna scratch that a little bit deeper because there's a lot more companies than just Nike that are suffering this problem.
But before we do that, it is July 2nd. Well, we're recording on the 1st, but hey, you know what? For you guys, it's the 2nd. It means we're more than halfway through the year. And so far, the S&P 500 has been a wild, wild place. We've had some incredible performance up and down the spectrum. And I gotta say, guys, I think so far this year, I think I've seen the widest spread of outcomes in the S&P 500 in a long time.

**Jon Quast** (1:04)
Well, yeah, I mean, first and foremost, if my math is right here, we had 22 stocks double or more in the first half of 2026 Now, I'm talking about 22 stocks among the constituents of the S&P 500
That doesn't seem normal to me. I haven't checked the historical data, but having that many stocks double or more, I mean, we look at some of the higher end stocks, the top five, I mean, it's far more than that. So to have the... These are the largest US based profitable companies. To have this many going up this fast, it just is remarkable.

**Tyler Crowe** (1:40)
To your point too, Jon, it's not just like the smallest companies going from like 20 billion to 40 billion. This is like Micron going from 500 billion to a trillion dollars in six months or so. Not the specific one, but that's an example, like massive companies making massive moves.

**Matt Frankel** (2:00)
I feel like there were two tales of the first half too. The first quarter was ruled by fear. You had the Iran War starting, you had the SaaS apocalypse trade, that was all during the first quarter of the year. Then the second quarter was all optimism.
The Iran War ended and restarted 78 times, and each time the market rerated and had some positive, some optimism there. We saw the AI trade really start to pick up, especially when it comes to the picks and shovels plays. For the first time since 2003, small caps outperformed the S&P 500 for the first half of the year by a significant margin.
We saw a lot of unique aspects of this year. You're right, it was a roller coaster ride. The S&P 500 is up for the year, but it was not a straight line getting there.

**Tyler Crowe** (2:48)
Something you mentioned too while we were pre-taping is, I think this is the first time in a while that the magnificent seven stocks were actually underperformed, the S&P 500 on a total basis. So a lot of wacky Wednesday, everything is upside down feeling to what we've seen so far this year. Now, like you said, a lot of the things that we've seen so far have been solid trends. I think people who have been listening to the show caught on to what's done well, what's done great. Stuff that stinks is like SAS companies not doing necessarily well because death of AI.
Then AI infrastructure companies are the ones that were actually killing it. We're talking about the chip companies, a lot of the tangential industrial companies are associated. But there's a lot of other hidden aspects and maybe unconventional winners so far in the S&P 500 So guys, when you look down the list and we scoured them a little bit before the show, which one popped out as like, hey, this is doing surprisingly well. It's not correlated with these megatrends that we're talking about here.

**Jon Quast** (3:47)
Yeah, I mean, to your point, it's basically the AI infrastructure buildout that is among the top performance in the S&P 500 But if you go down the list of ways, number 51
So this doesn't even crack the top 10 percent, but this is Casey's General Store and that ticker symbol CASY.
This is a Midwestern convenience store and gas station chain, and it was up 41 percent in the first half. That's a tremendous six-month performance. Doesn't even crack the top 10 percent of the S&P 500, which is just remarkably laughable to me. But with gas prices going higher, I wasn't surprised that people were spending on gas necessarily. But I was wondering, is this consumer discretionary spend going to come under pressure? Well, restaurant sales, they were under pressure here in the first half of the year. But you look at Casey's, where it really makes its money is in the prepared foods part of its business. People go to the gas station. Now you can get kind of these grocery items as well. But the prepared foods are close to a 60% margin. So this is the real money maker for the business. The same store sales for prepared foods up 5% in the first half of its fiscal 2026, which just ended here in April. But that's a very strong showing in more of like the restaurant category here for Casey's. And it is driving a lot of its outperformance right now.