Motley Fool Hidden Gems Investing - Amazon's Big Bet on the NFL

Episode Date: September 16, 2022

Another rough week for the stock market coincides with Amazon's exclusive start to Thursday Night Football. (0:30) Emily Flippen and Ron Gross discuss: - FedEx shares having a historically bad day amid talk of a recession - Adobe spending $20 billion for a start-up software design firm - Optimism around Starbucks after an impressive (and detailed) investor day - Twilio laying off 11% of employees - Two business leaders and their legacies (19:45) John Ourand from the Sports Business Journal discusses Amazon's investments in NFL programming, Disney's thinking about ESPN, college football playoff expansion, and story lines for the MLB playoffs. (35:30) Ron and Emily share two stocks on their radar: Union Pacific and Costco. Stocks discussed on the show: FDX, ADBE, SBUX, TWLO, AMZN, DIS, AAPL, UNP, COST Host: Chris Hill Guests: Emily Flippen, Ron Gross, John Ourand Engineer: Dan BoydGenetically edited humans are already here. Gene editing has massive implications for treating chronic illnesses and even the food we eat. So what does this mean for your investments and, y'know, possibly humanity? Ricky Mulvey talks with Motley Fool Advisor Karl Thiel about: - How CRISPR works - Some of the possibilities for CRISPR, from sickle cell cures to drought-resistant crops - How investors can approach investing in gene therapies - Biotech metrics to watch. Companies mentioned: BLUE, CRSP, GILD, EDIT, VRTX, NTLA Host: Ricky Mulvey Guest: Karl Theil Engineers: Tim Sparks, Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

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How much does Amazon have riding on Thursday night football? And who gives away an entire company? Motley Fool Money 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 Chris Hill. Joining me in studio, senior analysts Emily Flippen and Ron Gross. Good to see you both. How are you doing, Chris? We've got the latest headlines from Wall Street. We'll talk NFL

primetime with John Oran from the Sports Business Journal. And as always, we've got a couple of stocks on our radar. But we begin with another rough week for the markets. The Dow, S&P 500 and Nasdaq all down again this week, punctuated by shares of FedEx falling more than 20% on Friday. First quarter profits and revenue for the Bellwether Company were lower than expected. Ron, we'll get to FedEx itself in a minute. But this was another rough week where it was hard to find optimism anywhere. If you could buy shares of pessimism, I feel like that is a stock that would do well. That's fair. I didn't enjoy this week, I'll be honest with you. The bottom line is that we got some inflation data. The numbers

came in hotter, higher than expected or even hoped for, which caused investors to believe that the Fed would have to continue to aggressively raise interest rates, and that sent the market it down. At the same time, as you mentioned with FedEx, the economy is starting to show signs of weakness, which is, after all, the desired outcome of the Fed, so we shouldn't be surprised. That's what they're trying to do. I think we're likely to see companies start to miss their earnings estimates or actually bring estimates down over the next quarter or two as the economy does, in fact, start to slow. Then we'll see if we actually slip into a recession or we manage to avoid one.

Emily, normally I get excited for earnings season. This was one of those weeks that makes me think, maybe when earnings season kicks into high gear next month, it's not going to be pretty. FedEx is a bellwether stock for the global economy because you can think about the thousands of businesses that use their services to run their own businesses. It's almost like a canary here saying, hey, headed into the holiday season, things might not be that great. Although I will say, a lot of the headwinds that FedEx was experiencing in the quarter were things that were very prevalent last quarter as well. They did make a lot of cuts, decreasing their cost structure

in order to meet guidance that they had set out previously. It just got my head scratching about why they weren't a bit more proactive with this last quarter. Ron, in terms of FedEx itself, obviously, the profits and revenue were not great. They appear to be taking a pretty aggressive approach to cost savings. They're talking about shutting down offices, deferring hiring, and more? Yes, out of necessity, quite frankly. When you have revenue up only 5% and earnings actually down 6% and margins getting smacked around due to weakness, quite frankly, everywhere, they highlighted Asia and Europe, but domestically was no treat either. You have to look at right-sizing

the business. They're going to do things like close 90 office locations, close five corporate office facilities, defer hiring, reduce flights, cancel projects. They're going to reduce their CapEx budget for the year by $500 million. It's still $6.3 billion, but half a billion dollar cut to that. They're doing what they can. They withdrew their full-year guidance. One of the reasons the stock is down so much, because investors and analysts just don't like when companies are forced to do that because it shows that they don't have visibility into their own business. If they don't have visibility, then why should an investor feel that they have any visibility? I was going to say, is that something

we should expect more of as we get into earnings season next month? Or maybe not expect, should we not be surprised if other companies follow suit and just pull back guidance altogether? I think it's fair to say yes. The more that do it, the easier it becomes for others to do it. Companies are hesitant to do it, because even though we'd prefer they worry about their business and not their stock price, they do worry about the stock price and the analyst community. I wouldn't be surprised if we start to see a lot of guidance being pulled. Here's my confusion. They talk about this impending recession, and certainly they're seeing the impacts on their business today. But everywhere I look, Chris, we were talking

earlier, we're seeing lines outside of Apple stores for their new iPhones. We're seeing unemployment still really low. So, part of it just has me confused, because we're getting one narrative from companies right now saying, look, earnings are going to be bad headed into next earnings season, right? Shipments are down. But at the same time, American consumers still seem to be spending money. They seem to be spending money, and employment is still quite robust. But as earnings come down, that's when companies will, you'll see the lag. Companies will start to say, where can we cut, just like FedEx And then, we'll probably see the employment picture change a bit, and that's where you

probably either enter a recession, hopefully a mild one, or maybe just skirt around it, but clearly, the economy will weaken. Well, not every company is cutting back on spending money. On Thursday, Adobe announced third quarter results that got completely overshadowed by their other announcement, which is that Adobe is buying Figma, a software design firm in a cash and stock deal worth $20 billion. Shares of Adobe fell 17% on Thursday. Emily, safe to assume that absolutely everyone thinks they overpaid for Figma? Well, this is just chump change, right? Who can't reach into their couch and pull out a good $20 billion in change? No, this is a huge deal. And it led to Adobe's largest drop in over a decade.

So, investors are very scared. And unfortunately, it overshadowed what was a pretty strong quarter otherwise. Revenue rose 12% for the business. Margins expanded. While guidance was predictably weak, the business itself still remains very stable. But there were two main things that were contributing to, I think, the investor response to this acquisition. First being, obviously, the price tag. $20 billion is a lot. It's double Figma's valuation that they had this time last year. That's at a time when other tech valuations have dramatically fallen over the course of the year. So, it values the company at around 50 times annualized recurring revenue, extremely lofty valuation. So, part of the response we're seeing is in regard to the price tag.

But secondarily, it's in regards to Adobe's strategy here. I mean, this is a big departure for Adobe in the past. They've always been acquisitive, but acquisitions to this point have largely been tuck-ins and at reasonable multiples. So, it shows how disciplined the management team has been with capital allocation to this point. But clearly, there is something about this deal that is reactive and not proactive, in my opinion. They're looking, in my opinion, to take out what is probably a really formidable competitor, which does leave me confused about what potential regulatory impact there could be as regulators take a look at this massive deal. But it's certainly rubbing investors the wrong way this week.

You think if Microsoft made this exact same deal, they would get the same level of scrutiny? You would like to think any deal gets scrutinized by regulators, but would they have a better chance of having it approved? I definitely think they would, in part because their offerings aren't as directly competitive as Figma is with Adobe's offerings today. They also have a bit of a better budget, I suppose, for purchases of this size. More importantly, it's not a completely different strategy for Microsoft. I still think it'd be scrutinized in terms of the price. There's no reason why a valuation should double in a year when other valuations have come back down to earth. But in this case, I think it's a combination of

both that price tag and Adobe's past strategy. Shares of Adobe are at their lowest point in almost three years. You look at that and think, oh, this might be an opportunity to buy or still too many question marks around this deal? I still have too many question marks around this deal. Large acquisitions like this rarely pay off, especially when they're made out of necessity instead of desire. Shares of Starbucks up this week. on Tuesday, the coffee giant held an Investor Day presentation. Among the highlights, the company will be investing $450 million to improve coffee machines and stores, with the goal of speeding up the process for baristas. And, Ron, when you consider 70% of coffee

sales are cold drinks, and some of those cold drinks are really complicated to make, that's one of those investments that could move the needle. But there were a bunch of announcements. What stood out to you? They covered a lot of ground. I think if you're a shareholder, which I am and I think you are as well, there was a lot to like here in what they're calling their reinvention plan, which emphasized some of the things you talked about, some cost reductions, enhanced employee benefits, which I think is quite important, actually, and technology. It's designed to keep that line moving when you're ordering your triple caramel mocha ice latte with one shot of decaf and two shots

a regular. We're going to have a better throughput, I think. That will improve the barista experience as well as the customer's experience. This plan is going to accelerate growth. They think it'll drive EPS growth 15% to 20% annually through fiscal 2025, guiding for really strong comps both here and in China. China remains a big part of this story, especially as COVID subsides. They plan to accelerate store expansion, growing the count about 7% annually. That'll be 3% to 4% growth domestically, 13% in China. Many of those new stores will be pure drive-thrus or delivery hubs, not the full walk-in cafes that we've become used to.

They're going to spend $2.5 billion to $3 billion annually to build these out. They're on the move in both improving efficiencies, building new stores, improving margins, and that's going to flow down to the bottom line as their new CEO takes the reins from Howard Schultz. Earlier, I was talking about pessimism. I think it's worth pointing out the optimism around Starbucks and this event. This is a bad week for the market. Shares of Starbucks are up off of the presentation they made. I have to be honest, Ron, my reaction in the moment when they were talking about, this is what we think it's going to do for our earnings per share, I got a little nervous and I just thought, oh, God, don't build up

expectations, don't say that out loud. But when you look at the effect of the new machines, these new processes, and how it really could speed up throughput and boost the same store sales numbers, maybe it's not that crazy. It's not that crazy, and they were quite specific. As you say, they're setting themselves up to have to perform here, otherwise they're going to be taken to task. The business looks strong. The stock's not that cheap, a PE of 30X currently. But the E of that PE, I think, is going to start to accelerate. In reality, that 30X will be lower or come down. 2.2% yield, nothing to sneeze at either. Well, as an order of the nonfat mocha iced extra shot with caramel drizzled drink,

I'm personally attacked. But no, to your point, I'm really interested to see what Starbucks' new CEO has for this company moving forward. The investor day really didn't focus on that leadership transition at all. So, I think the market is probably going to be asking into next year, okay, what's the vision here and how is it different than the vision that Howard Schultz has already laid out? After the break, we've got a closer look at two business leaders and the legacies they are leaving. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Emily Flippen and Ron Gross. This week, Twilio announced plans to lay off 11% of its workforce. Jeff Lawson,

the CEO of the cloud communications software company, said the decision was extremely difficult but necessary. Emily, Twilio is not profitable, and Lawson clearly is hoping that this is one of the moves that are going to help them get to profitability in 2023. Laying off 11% of somebody's workforce is certainly no joke, but neither is more than a billion dollars in operating losses over the past year, which Twilio has experienced. Management has been really upfront about their goals to reach an adjusted level of profitability over the next couple of years. That's not going to be easy if you have what some believe to be a relatively bloated company. What you have here is another software company. I call it software

companies in particular, but companies that benefited from the pandemic pull forward, looking at their business, how it's grown over the past couple of years, and realizing that they've made mistakes by allowing themselves to get spread too thin. And as a result, overhiring in areas that are maybe no longer necessary for the core functionality of the business. And it's a very hard decision to make. And I think there's lots of discussions about how Twilio communicated this decision to its workforce that are worth considering and breaking apart. But it's clear that this was not an easy decision. And more importantly, I don't think they're the only company that's going to be having to make these tough decisions

over the next couple of quarters, because it's clear the economy is not set to get significantly better in the near term. So, ensuring that they have the ability to self-fund their operations without the need for outside capital, whether it be from the debt markets or shareholders, is going to be critical. It's going to be interesting to see, because you're right, Twilio is not the only company that has basically talked about this narrative, hey, we hired too much over the last couple of years, we're going to have to be more efficient going forward. It is going to be interesting to see if a few years down the line, these companies, and you're right, a lot of them are software companies, basically take a page out of what

we saw from the housing market, where they course-corrected in the wake of the Great Recession and really just got very lean in terms of the number of houses they built. Long-term, Twilio and a lot of other companies may end up being much more efficient as a result. I hope so. And you're giving me the opportunity to get back on the soapbox I was on last week as regards to efficiency here, Chris. But unless you fix the underlying cause that caused the inefficiencies to be created in the first place, you could be looking at a business that is going to be extremely inefficient another five years, right? One-time layoffs do not fix the problem. They're the symptom of an underlying problem. So I hope that all of these companies, Twilio,

Shopify, a handful of other software businesses that have laid off massive portions of their workforce, I hope they take a deep, hard look at their systems and fix what's clearly broken. More than 50 years ago, Yvon Chouinard founded Patagonia. Chouinard and his family are giving away ownership of the apparel company. Patagonia will go into a trust and all of the profits that are not reinvested in the business will go to organizations focused on protecting wildlife and fighting climate change run. This is about a $3 billion company. I don't recall ever seeing this type of move before. We've certainly seen leaders of companies give away their fortunes. I've never seen giving away the entire company like this.

Nor have I. As you say, we've seen things like the Giving Pledge with Gates and Buffett giving large portions of their wealth to charity over time. But this is really putting your money where your mouth is. It's very admirable. It's very impressive. It's very unique. This is a lot of money. This is his family's wealth. This is a company that has been in the family for quite some time. They really are committing to climate change and the climate crisis, I should say. It's an interesting structure with trusts. It'll still be a for-profit corporation, But how to get this done is quite interesting for those that find that kind of stuff interesting. But I'm just very impressed. Patagonia is also one of those brands

that people who are fans of it are really passionate about it. It seems like this move will only engender more of that going forward. How could you not support a company that you liked anyway after you see what they're doing for the environment? Really, really impressive. Pour one out for Fred Franzia. The co-founder of Bronco Wine Company died this week at the age of 79. And of the hundreds of brands of wine Franzia's company owned, he's probably best known for the Charles Shaw brand, also known as Two Buck Chuck for anyone who's ever been to a Trader Joe's. Emily, I feel like we need to go shopping after this and just hit up the local Trader Joe's and just fill up the cart with some Two Buck Chuck.

You know, I never thought I had a real-life hero. But now, when people ask me who my hero is, I think I have an answer for them. Because anybody who's aiming to democratize access to wine the way that Fred Franzia has worked is really good in my book. Here's what I will say. As we got into this story, yes, 2 Buck Chuck is great. But the thing that came to my mind immediately was, well, Franzia boxed wine. How is that not more disruptive than 2 Buck Chuck? Well, it turns out Mr. Franzia actually sold the name brand to, I believe, Coke back in the 1970s. So, despite the name, they don't own the Franzia brand. Ron, Emily points to something which is pretty interesting in terms of Franzia's life and his career, which is that he was not beloved

within the industry because he was very upfront about the fact that a lot of wine is just wildly overpriced. And he really did do a lot to essentially democratize what was once sort of a pretty snooty product. For sure. The price thing really angered some in the industry, and you could understand why. But they also were a little bit upset because he was trying to say that there really isn't that big a difference between a $2 bottle, a $10 bottle, or a $20 bottle. And there are many within the industry who vehemently disagree with that. And they thought he was doing the consumer a disservice by saying that they were all similar. Well, the only difference is the labels

are cuter on the more expensive ones, right? Absolutely. All right. Emily Flippen, Ron Gross, we will see you later in the show. Up next, what should investors expect from Amazon's investment in Thursday Night Football? We'll talk with Sean O'Rand of the Sports Business Journal. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. More than 120 million people watched the NFL's opening weekend. Here to talk through some of the latest sports business headlines is John Orand. He covers media for the Sports Business Journal, and he joins me now from Washington, D.C. John, thanks for being here. Thanks, Chris.

Let's start with the NFL. You and I are recording this on Thursday afternoon. We are just a few hours away from the Thursday night game between the Chargers and the Chiefs. And what is noteworthy from a business standpoint about this game is that it will be shown exclusively on Amazon Prime. And there are a couple of different ways we can go here, John, but I'm curious what you think this does to the TV landscape, because I'm, you know, as a shareholder of Amazon, I am hoping this works out for them. But this doesn't seem, to mix sports metaphors, this doesn't seem like a slam dunk. And I'm just curious what your thoughts are in terms of what this means for Amazon and what this means for other networks. What this means for Amazon is

they have Amazon Prime, which is a video service, and they're trying to build out the video service. And if you have an entertainment-focused video service, you have a lot of competition. You have Netflix, Apple+, the Disney bundle, Peacock, Paramount, you can go on and on. Amazon has decided that one way to differentiate itself from all these other services is to go after high-profile sports. They got the biggest daddy that there is in terms of the NFL. The NFL's Thursday Night Football is going to be exclusive to Amazon. Amazon is now paying, I think, a little bit more than $1 billion a year for the rights to these games. Amazon is spending a boatload to produce these games. They got Fred Cadelli, who is a famed producer who's been doing Sunday

night football at NBC for years to come over and do it. Al Michaels, who's the best play-by-play announcer, I think in probably NFL history, he's been calling the main primetime game since 1986, is doing the play-by-play. Kirk Herbstreit, another high-priced on-air talent, is doing the analysis. And when you watch these games, when you watch the games on Amazon, it is going to feel like a broadcast primetime game. And that, for the TV business, is so unusual. I know this is many years ago. It was like 35 years ago. But when ESPN first got into the NFL, its productions looked and felt like a cable TV production compared to broadcast. They decided to try to grow with the NFL and not immediately start with such a big broadcast. Amazon is taking the exact

opposite approach. It's spending a boatload. I think it has 29 cameras, about the same number of cameras covering a game that covers a Super Bowl, for goodness sakes. And this is just a regular season game. So they're taking an opposite approach. And part of what I think they're doing is they're trying to send a message to other leagues to say, look how well we're going to treat your product if you come to us. Because right now, Amazon is finding that even though they're bidding more money than some of the networks, a lot of the leagues, F1, Formula One racing, the Big Ten, they've decided to stick with traditional linear television at a lower price point because it reaches more people than going to Amazon right now. So this is all, everybody,

the entire sports media industry is taking a look at not just this game, but the entire season on Amazon to see how it fares. There are a number of business angles to watch here. You talk about the ratings. That's certainly a key part of that. For Amazon, the advertising that flows from the ratings, so their ability to deliver for advertisers. Do you think this represents an opportunity for other networks. I mean, to your point, Thursday Night Football, if it's on network television, it's probably commanding a bigger audience. Competing networks may be reluctant to program in a significant way. I don't think there's anyone, including, by the way, the folks at Amazon themselves, who believe that the raw number of people watching on Thursday night

is going to be higher than what we've seen in the past on network television. And so, if you're ESPN, TBS, I don't know, do you bump up your programming game on Thursday nights? Because it's a little bit more of a fair fight. Chris, it's so interesting because if I were running a television network right now, a sports television network, that's exactly what I would do with ESPN. I would put a prime college football game on because people will watch it. And Fox, I might think about taking their highly rated wrestling, which is on Friday night and put it on Thursday night because it's much more cumbersome for people, especially older people, to find Amazon Prime and find this NFL game. What's happened, though, is the networks aren't

aren't doing that yet. They're taking a wait and see approach. And even the most conservative estimates, which has, you know, Amazon, a game on Amazon getting, let's say 7 million viewers. That's a very conservative estimate right now. Nothing in TV is getting 7 million viewers. It's the, it's the power of the NFL. And so you still have these big linear networks that see that 7 million number and say, well, we don't, we don't want to go up against that. So they're, they're taking a sort of go slow approach, see how Amazon's doing, and then they're going to make their plans. But I think I would be a lot more aggressive right now. One last thing on this topic, because Fox has the Super Bowl next year. And I saw a story recently that a 30-second ad

is going for $7 million. Fox has reportedly sold the bulk of the broadcast. I mean, is this is this why we're seeing Amazon throw the amount of money that they're throwing at not just the rights for Thursday night football, but to your point, the production value behind it, because nothing really delivers numbers in live television the way that sports does. The television advertising is worried about a recession. They're worried about inflation. And you're seeing it become weak across the business, except for the NFL and except for actually actually really major sports, college football. I think you can throw in there. Fox has had a lot of success with postseason baseball as well, which is coming up. So there is a there is a real sense that these big TV networks and traditional linear television, live sports and live news and even some even the awards shows,

Anything that is sort of live attached to it, that's their last reason for remaining in business, because anybody that subscribed to traditional cable television or watched primetime broadcasts for entertainment shows have already migrated to Netflix and Apple TV Plus and the myriad of series that are being streamed over on those services. Let's stick with ESPN for a moment, because last week Disney had their D23 Expo, the main purpose of which was to show off upcoming movies and TV series for Disney+. Disney CEO Bob Chapek gave some interviews and the headline that caught my attention out of those interviews was he completely shot down the idea that's been around for years now of Disney spinning off ESPN. What was your reaction to that? Because Chapek, among other things, seems to have ruffled feathers in various corners here or there, but say what you want about the guy. He seems to be pretty definitive when he wants to be, and he seemed pretty clear that ESPN is staying in-house.

My reaction to that was not quite a yawn, a little bit more than a yawn. I'm not sure what the grade is on that. Maybe one arched eyebrow, but not two. There have been a lot of rumors going around about Disney potentially selling off ESPN. There's been cord cutting in cable, so ESPN is not going to as many subscribers. They're losing subscribers while the cost of sports rights are going up. It looks like an awful business, right? It's not. Inside ESPN at the highest levels, while they've looked into it, as you would expect, it never got serious and the talk never got serious. And I think what you saw Bob Capek say was he came out as forcefully as he could and said, that is not going to happen. But Chris, what I found to be particularly

interesting about what he said is that he views ESPN as a huge growth opportunity. And so here's ESPN, which has been the best part of Disney's quarterly earnings from 2010 through 2018 or so, it just prints money and goes. You would have thought that its big growth prospects were in the rearview mirror, but JPEG still believes with sports gambling and with streaming that there are different areas where ESPN can really focus in on those and start to grow as big as it had been growing during Cable's heyday. The college football playoffs are going to be expanding 12 teams. I suppose this really shouldn't surprise anyone, should it? When you think about it, the NFL is king when it comes to live sports in America. Is college football

second? Does it supplant the NBA and Major League Baseball? Because that would help explain a pretty significant expansion of the playoffs. I mean, it depends on how you look at it. In terms of sheer audience numbers, you have the NFL and then you have a pretty big drop and you have college football and then you have a pretty big drop and you have everybody else. The reason I'm hesitant to say like, oh yeah, college football is bigger than the NBA is that college football is made up of so many different conferences, the SEC and the ACC and the Big Ten and the NBA and Major League Baseball come in as big national brands there. So it's a little bit difficult to compare those two. But I think what you're seeing with colleges, the Big Ten just sold

their media rights to CBS, NBC, and Fox. And it's the first college conference, one college conference that's making more than a billion dollars per year in media revenue. And so anybody that's involved with the business of college athletics is taking a look at that deal they're saying we right now we have a 14 playoff they also are taking a look at the NCAA tournament which is you know for basketball which is a huge deal there as well it's like well why don't we expand and why I think what's going to be particularly interesting and sort of the story that I'm going to be following is how much this is going to bring in because the games that they're going to be bringing in aren't necessarily going to be Alabama versus Auburn. I think you're going

to see sometimes, you know, Boise state playing Utah. Cause those kinds of those got in there as well. How, uh, you know, the, these television networks, they're for-profit companies. Like how much are they going to pay on sort of the Cinderella games like that? And then if, uh, if Alabama is playing, I mean, we've seen already with the, uh, the college football playoff, we've seen these semifinals. I don't have the stats on it, but a huge percentage of them have been blowouts. They haven't been good games, and that's not good TV, and it's generally that doesn't bring in a lot of viewers. TV network executives, they look at that and check. There's going to be a lot of interest in it, of course, and there are going to be a lot of

people milling around to try to get it, including Amazon, I would think, and they're going to get a fine number, but I am a bit of a skeptic when it comes to that. I think that the TV networks in particular are going to take a look at the data and hesitate on going whole hog with the college football playoff expansion. Let's wrap up with baseball. There are three weeks left in the Major League Baseball season. When it comes to the playoffs, ESPN has the wildcard games, TBS and Fox have the rest of the playoffs with the World Series on Fox. If you're running those networks, John, how are you feeling about the teams and the storylines heading into the playoffs? Because this isn't like the Super Bowl, which is guaranteed to get

a big number every year, regardless of which teams are playing in it. The Major League Baseball playoffs really are dependent on the teams, the markets, and the storylines. Yeah. Only in the NFL can a team from green Bay, Wisconsin be one, one of the highest rated, uh, team teams around that, you know, this is one of the issues that baseball has had to deal with. And if you look at the national ratings over the past several years, you might, you would think that it would be, you know, a week, a weaker sport, but baseball locally is so strong, even with the downfall of some of these regional sports networks that are carrying the games locally. You know, I just took a look at, uh, Baltimore Oriole ratings in Baltimore this summer, it's the highest rated

show every night they play in prime time in Baltimore. I mean, it's substantial how they can get those, those numbers are, and that interest and translated into the playoffs usually depends on the big brands are the Yankees going to get through are, you know, I think the Astros have proven to be a pretty good brand as well. Um, the Dodgers are, you know, they have superstar players that people know and they've been around for a while. And what, what, uh, the net, the networks and baseball are hopeful for is that, uh, it's less about the big personalities like, uh, um, you know, Aaron judge is a big personality, but he, you know, he's with the Yankees. It's more about these big markets. If the Yankees get in, you get the number

one TV market. That's all of a sudden watching every night and the ratings will be okay. Uh, If they end up with, you know, Toronto playing, you know, Minnesota, it might be, it will be a tougher road to hoe for baseball, Fox, and Turner. You can read him in the Sports Business Journal. You can also hear him every week on the Sports Media Podcast that he co-hosts with Andrew Marchand of the New York Post. John Oren, thank you so much for being here. Always a pleasure, Chris. Thanks. Coming up after the break, Emily Flippen and Ron Gross return. They got a couple of stocks on their radar. So, stay right here. You're listening to Motley Fool 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 don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here in studio with Emily Flippen and Ron Gross once again. It's time to get to the stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Ron Gross, you're up first. What are you looking at this week? I got Union Pacific. UNP operates the Union Pacific Railroad, one of the two largest railway networks in the U.S. They've got a strong, durable, competitive advantage. They have pricing power.

They're increasing their efficiency. That leads to really strong net margins. I think those will continue to improve. They've paid a dividend on their common stock for 123 consecutive years, Dan. That's a 2.3% yield at the moment. The reason I bring this up now is that we were on the verge of a strike by railroad workers that seems to have been averted, partially with the help of the Biden administration. Better pay for their workers, exemptions to attendance policies, allow them to seek certain types of medical care. A lot of good stuff. I'm really glad to see that that was averted. The rails roughly transport about 30% to 40% of the nation's freight, and so that would have been a pretty big disaster. Dan, question about Union Pacific?

Old economy, Ron. Back in the saddle, y'all. That's right, Ron's talking about a company that's existed for, what, thousands of years now, Ron? The dawn of time, Dan. Emily Flippen, what are you looking at this week? I thought I was going to have the boring stock this week, but leave it to Ron to take the cake. No, the company I'm looking at is Costco. The ticker is C-O-S-T. People are probably already familiar with this company. But the reason why it's on my radar is because they report their fourth quarter results on September 22nd. I'm very interested to hear what they'll say about the state of American consumers. Prices for gas have come down.

Last quarter, they saw a benefit of 5% in total sales as a result of just the increase in the price of gas. But even with backing gas out, the business still has performed extremely well. Sales were up 16% last quarter, even as inflation has started to rear its head. So very interested to hear what management says about inflation, how they set up expectations for the remainder of the year. Dan, question about Costco? Well, first, I want to point out that Motley Fool producer emeritus Mac Greer is probably doing backflips in his house right now to hear Costco mentioned on the show. Costco, of course, Emily, not a wild pick here, very sort of stayed solid company. Is there anything specific coming from Costco that makes you want to put them on the

radar other than their report? Well, here's the reason, is because for probably the past five weeks now, I have given investors and listeners for this podcast some crazy wild picks. I want proof that I can be a diversified generalist investor who looks at things other than unprofitable Chinese tech companies. And Costco is one of the best-run companies in the U.S., in my opinion. And what Ron said. Dan, what do you want to add to your watch list? I got to take a train trip next month. No, seriously, I got to take a trip up to New York for New York Comic Con next month. So I'm going to go with trains in Union Pacific. Awesome.

I want to watch a documentary of you and Ron taking a train trip together. That'd be awesome. All right, Ron Gross, Emily Flippen, thanks for being here. Thanks, Chris. Thanks, Chris. That's going to do it for this week's Motley Fool Money radio show. The show is mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you next time.