Motley Fool Hidden Gems Investing - Doubling Down on China

Episode Date: December 14, 2018

Johnson & Johnson falls on health concerns over the company’s baby powder. Under Armour gets a rough reception after its investor day. And Starbucks announces plans to deliver coffee in the U.S. and double its store count in China. Analysts Andy Cross, Ron Gross, and Jason Moser discuss those stories and the latest from Adobe Systems, Markel, and Casey’s General Stores. Plus, CNBC host Carl Quintanilla previews 2019 and talks cannabis, Facebook, and General Electric. Thanks Netsuite. Get the FREE guide, “Crushing the Five Barriers to Growth”, at www.NetSuite.com/Fool. And thanks to Slack for supporting Motley Fool Money. Slack: Where work happens. Go to slack.com to learn more.   Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode of Motley Fool Money is brought to you by Slack. Slack is a collaboration hub for work that makes sure the right people in your team are always in the loop and key information is always at their fingertips. Learn more at slack.com. Thanks also to NetSuite by Oracle, the business management software that handles every aspect of your business in an easy-to-use cloud platform. Get the free guide, Crushing the Five Barriers to Growth, at netsuite.com. 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 this week, senior analysts Jason Moser, Andy Cross, and Ron Gross. Good to see you as always, gentlemen. Hey, Chris. We've got the latest headlines from Wall Street. CNBC host Carl Quintanilla is our guest. And as always, we'll give you an inside look at the stocks on our radar. But we begin with surprising news from Johnson & Johnson. The stock fell nearly 10% on Friday after Reuters reported that Johnson & Johnson knew for decades that its baby powder contained asbestos. Jason,

I can hardly believe this story. I mean, it is definitely a headline. Now, it's worth noting, too, that Johnson & Johnson is disputing this. This is sort of a, he said, she said. But I would argue, even at this point, I don't know that that matters, because it's ultimately beyond any financial punishment that they may or may not feel from this. The trust factor, to me, is above all else. I have a hard time believing that anybody who reads this story, or more than likely in today's society, they're going to see the tweet or the headline and not even bother reading the story and make judgment just from that. And if you read the headline, then you probably are sitting there thinking,

well, they're guilty, I'm just never buying that baby powder ever again. So, I think there is a big trust issue that could develop from this, regardless of the actual facts. And that, I think, could be a really, really big problem. Yeah. It's more wood on the fire. Is that a phrase? It is now. It's more wood on the fire following the Missouri trial where Johnson & Johnson was ordered to pay $4.9 billion in a case involving 22 women and their families who claimed that talc was responsible for ovarian cancer and them being quite sick. And so, you know, now this is uncovered. If it ends up being true, it compounds the problem, you

know, exponentially, in my opinion. You know, it was more than 30 years ago that the Tylenol scare hit Johnson & Johnson, and I think that was just an example of how to handle a terrible incident. Now, to Jason's point, they are coming out and they've categorically denied this. So, we'll see what happens. But it clearly is not good for the brand side. Yeah. I mean, the way that they handled Tylenol back in the 80s, I mean, that is literally taught in classes about how companies can best handle a scandal like this. It'll be interesting to see how this plays out further. But yeah, just the headline alone, as you said, Jason, is pretty bad. At an investor meeting on Thursday,

Starbucks outlined its plans for the future, including a new delivery partnership with Uber Eats here in the U.S. and doubling its presence in China. But Andy, Starbucks management also lowered its long-term earnings guidance, and that's what was sending the stock lower. Yeah, Chris. So, the story in China, I mean, the last four quarters, we've seen this declining comp growth, so same-store sales growth in China over the last couple quarters. The CFO came out and said that we're looking at more like 1% to 3% annualized comp store growth. Most of the growth in China will come from the new stores. They're hoping to get to more than 6,000 stores, which is opening at about 600 per year in China, which is their second-largest market. So, the slowing

growth on the comp store and their second-largest market, combined with some of the issues we've in the U.S. Sales growth estimated somewhere, they're guiding somewhere between the double digits and about the same level in earnings per share growth. So, investors are saying, wow, the stock's had this really nice rebound over the last few months. But this news now, maybe the growth story is just slowing to a level that it's not worth owning the stock. I own Starbucks shares, and I still like the stock here. Yeah. Can we draw the line at coffee delivery? I mean, is that really necessary? I mean, I'm reading that story and thinking, wow, man, we're really out of shape.

It's going to take you that much just to get up and walk down to your neighborhood Starbucks and grab a cup of coffee. To me, that's where I feel like that's just a bit too much. That may be the straw that breaks the camel's back. Is it all hot beverages with you, or just coffee? I mean, anything, really. If it's a Frappuccino, by the time you get it, it's melted and the whipped cream is gone. If it's coffee, it's likely tepid by the time you get it.

And who knows? maybe you piss off the driver and he spits in your coffee. How do you know? You're really worked up about this. I just, to me, it's one of those things where I just, there's got to be a point where we have enough, right? So, just to be clear, most investors who are selling off this stock, it's because of the slowing growth. I'm not saying you're selling the stock, but the thing you're more bearish about is the delivery opportunity here in the U.S.?

I just don't like it. I don't like it. Get up and take a walk, people. Shares of Costco down 8% on Friday after first quarter sales came in lower than expected. Not a great way to close out 2018, Ron. No, I don't know how to follow Jason there. I like 85% of this report. This is not a problem. Sales up 10%. Same-store sales up almost 9%, with the U.S. at an 11% rate, international at 4%.

Traffic up almost 5%. And e-commerce up 32%. These are strong numbers. I think what the street and investors are focused on, those who are choosing to sell off the stock, are margins. And margins are down because, hey, we have an environment where you have to lower prices to compete, especially on the grocery side of the business. Higher wages, a good thing if you're an employee of Costco, they just raised wages for 130,000 store employees, $1 per employee. So, that's good. But it has an effect, it takes a little

hit out of margins. And they're investing to compete in the online space, which you have to do in today's day and age. So, as a consequence, margins come down a bit. But overall, you still have earnings per share up 18%. They're setting themselves up well to compete for the future. I still like the company quite a bit. The stock itself is pricey. You have to pay 28X to own Costco, where you could pay 20X or less for Walmart, Target, and BJ's. So, a little bit pricey. I'm surprised that it's that pricey because it's dropping on Friday. It's still up about 10% year-to-date. So, it's not like it's been shooting to the moon. It's certainly not shooting to the moon.

It's not ridiculously priced, it's just a premium price, but for an extremely well-run company. Real quick before we move on, does this increase the pressure just a little bit for Costco in terms of the holiday quarter and maybe doing a little bit better so that they start 2019 with a little bit more momentum? The holiday season is always important for retailers. For Costco, the name of the game is making sure people renew that membership and giving them value. As the prices come down for things, the value that people get actually increases, even though margins take a hit, and people are actually more likely to renew those memberships. The worst stock in the S&P 500 this

week was Under Armour. Shares fell 20%. After Under Armour held an investor day and shared guidance through the year 2023, and that guidance was definitely lower than expected. Jason, this is the first investor day they've had in three years. Based on what happened to the stock, I think it might be another three years before we see another investor day out of Under Armour. Well, that may be possible. I think the concern is probably more on the 2019 guidance as opposed to the five-year 2000-2023 guidance. I think on the bright side, Kevin Plank, he struck a decent tone of humility, recognizing that they made mistakes in this effort to pursue growth at

virtually any cost. And it definitely has cost them, as we can see. One of the things we've been paying close attention to is the fact that Mr. Bergman and Mr. Frisk stay on as partners, and they are still there, which is a good sign. That means that he is able to work with them. And I think they will continue to help him make the transition here back to growth. But it will be modest growth in the near term. They're targeting 40% annualized growth over the next five years for earnings growth. But for 2019, we're talking basically low single digits with North America essentially flat. And that has been a concern for the past couple of years, really, with Under Armour.

So, the brand still holds a strong position in the market. they really made some bungles with the business here over the past couple of years. It seems like they're cleaning that up, focusing on cost control and inventory. I think there is a future here, but certainly the market is not all that excited about what 2019 is going to bring. When, Jason, you were talking about the market they're selling into, the performance gear market, wasn't what it used to be. I mean, this was a business that was growing 20%, 30% sales, not earnings, sales growth. So, the performance market, not what it was a few years ago, and now their sales growth

have really dwindled. Of course, that's been a big driver for the stock price. I think the humility factor and the learnings, they have to really demonstrate that, and to learn from that, and to put forth a strategy and an operating manual that can actually work to take advantage of the shifting consumer landscape that they haven't been able to do over the last couple of years. And I mean, it's a stock that was priced on an entirely different set of expectations. So, I mean, looking at full-year 2018 earnings, that puts the stock around 90 times earnings. And if you look at 2019, it's still around 56 times those estimates, which is just really

expensive for a company that's having a lot of trouble growing both the top line and the bottom line. So, it's not a bad business, but certainly the stock has had to be repriced because the expectations have changed significantly. You know why we don't need as much performance gear? Because we're getting our coffee delivered. See? Full circle. It all comes around. More headlines after this, so don't touch that dial. You're listening to Motley Fool Money.

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And the mobile app is great, too. It works with iOS and Android. Slack, where work happens. Find out why at slack.com. 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 Jason Moser, Andy Cross, and Ron Gross. Nice fourth quarter report for Adobe Systems. Sales for the software giant rose 23%. Profits came in higher than expected. And Andy, the stock still sold off.

Amazing. I mean, I guess it's had a really good year this year, and this business continues to thrive really well. And their growth continues to be very impressive as they're thinking about next year's growth of north of 20% across both their businesses. They've made the acquisitions of both Magento for e-commerce and now Marketo for online campaign management, which lets them really put together an entire B2B package now for corporate consumers. So, these are people who have a leading brand in the space. It's a $120 billion organization, really good management. So, yeah, the stock sold off, but I would see that as a nice little buying opportunity. I mean, this is a business that is leveraging the cloud and leveraging the creating experiences

of their clients and building solutions that they want. Is the future, when you think of the next five years for Adobe, is the growth going to come from those type of acquisitions? Or is it more, look, when we talk about retailers and same-store sales, one of the things we like to see is boosting up that average ticket price. And I'm wondering if one of the pathways to growth for Adobe is just selling more stuff to existing customers. Yeah, I think that's exactly right, Chris. Their bread and butter had always been on the consumer side, so selling to very creative types. Now, as they continue to push further and further into the B2B business to business and selling to corporate clients and

building those solutions, they can package together a lot of different solutions. Now, they're competing against a lot of big competitors in that space, but like I said, they have the brand and the leadership team and the experiences and the solutions to be able to deliver that very profitable growth. So, when I see the stock kind of sell off a little bit, yes, it's had a nice run, but it's a very impressive operation. And I would see, like, hey, this is a company that's going to be around and more relevant over the next five years than it is now. December has been an unusually volatile month for Markel shareholders. Last week, the insurance company announced it is hiring outside lawyers to conduct an internal review after Markel

was notified by unnamed regulators. Jason, this is a steady, boring business, and this kind of excitement caused the stock to drop nearly 10%. Yeah, you don't see that kind of move with this stock ever, really. I think the last time we ever saw that, maybe it was an acquisition from five years ago. I like to generally take the approach that the market's got it right. In this case, I think this is an overreaction, though, and I'll explain why. This investigation is into a wing of the business called Markel CatCo, and essentially what it is, it's a reinsurance business. So, reinsurance and retrocession, which is essentially reinsurance for reinsurers, it's a very difficult business

to manage from a reserve side, because you have to make some predictions and forecasts when it comes to catastrophic events and whatnot. It's difficult to do. This is a case where the concern is perhaps that this CatCo business was under-reserved, given the natural disasters that have occurred. Management was very clear to note that this investigation is only into this part, this CatCo part of the business. It doesn't have anything to do with Markel Specialty or Markel Ventures or anything like that. And I think that's the important part to remember, because the bottom line for this CatCo business, they contributed about $28-$29 million to Markel's top line, which is about $7.5 billion. So, it really is just a drop

in the bucket. But I also understand, when you see the words investigation and insurance, I mean, the word fraud comes to the top of your mind here. I generally trust these guys. I think they've earned the benefit of the doubt here. And so, we'll watch them closely to see how they manage this. The stock isn't super expensive. It's not super cheap. It's around one and a half times book value today. I will, in transparency, let you know that I bought shares on this dip, because I felt like it was an overreaction for a business that has a very long runway ahead. Completely agree. It's a great opportunity, I think, to pick up shares of a wonderful

company that I've owned for years as well. I'm not sure what the point is in making the regulators unnamed. I mean, let us know. What does that help? I don't get that part of it. But I would absolutely give this company's senior management the benefit of the doubt when it comes to ethics. Now, if there's someone deep in the accounting department that is playing games, you can never completely ward off a problem like that. But I would absolutely give these guys the benefit of the doubt. If there's a problem, it was an honest mistake, and I'm a proud shareholder.

Second quarter profits for Casey's General Stores came in 41% higher than a year ago. Stock down a little bit on Friday, though, Ron. Yeah, the stock has been on a tear since the summer. It's really been impressive. And it's been a stock that's been not even on my radar, to be honest with you, but they've been putting up really impressive results. In this particular case, I think investors are focused on the fuel segment of the company, which saw same-store gallons sold down 1.1%. So, that's not as strong as obviously folks want it to be. But total revenue, we're still up 8%. And the other divisions of the company are doing real well. Grocery, same-store sales

up 2.7%. Prepared food up 2.2%. Earnings per share up 40% for a company that most people haven't even heard of. 2,100 stores. They're opening them up at nice clips. Management is strong. Company is executing very, very well. Yeah. I mean, this is one of those businesses that, unless you live in the Midwest United States, you're probably not familiar with Casey's General Store. I don't know if they break out the pizza segment. They do not. But Casey's is actually, a couple of years ago, it climbed to fifth in the United States in terms of pizza sales. Fascinating. Have you had the pizza?

No, I haven't. No, we're hundreds of miles away from the closest pizza. You travel, don't you? There are a few analysts who have visited the stores who lived in the Midwest, and they love the food there. I'm going to pivot from the pizza for a second, because there was a story, Restaurant Business Magazine this week. We think of McDonald's competing with Burger King and Wendy's, and they do. But the story was that by the end of this year, Chick-fil-A is almost certainly going to pass both Burger King and Wendy's in terms of U.S. sales. As well it should. I would not have guessed that for one second.

It's delicious. I believe that. I mean, we have a Chick-fil-A down the road from our house. And whenever I go get dinner, I mean, the move really with Chick-fil-A, you've got to get the car fries. You get the meal that you're bringing back home, but you need an extra french fries for the ride home. Because the waffle fries are so good. So, any restaurant, when you get the car fries, that shows you the power. There's still a lot of room for those guys to run.

I mean, it's unbelievable, right? Because they're not open on Sundays, right? And so, just on the per-store, per-hour served basis, they're clobbering it. They passed them probably a long time ago. And the fact that this company can have that kind of result and surpass those kinds of players, that's pretty impressive. Yeah, and in terms of locations, both Burger King and Wendy's have at least twice as many in the U.S. It's exceptionally well run. The throughput, how they can get you in and out is amazing.

They have employees walking the line with iPads, taking your order, so you don't have to wait until you get up to the front of the line. I know this from experience. I've been there quite a few times, and it's delicious. I just wonder, my family does not eat meat, so not chicken, and I want to go there, and I'm not quite sure how I can convince my kids to go there and what they could get. So that's my challenge for Chick-fil-A. I'll leave it at this. You know I love the Jangler.

I'm not getting car fries from those Janglers. So just get the car fries. That's my solution. They love fries. Problem solved. All right, guys. We'll see you later in the show. Up next, a conversation with CNBC host Carl Quintanilla.

Stay right here. This is Motley Fool Money. Caroling, caroling, now we go Christmas bells are ringing Caroling, caroling Welcome back to Motley Fool Money. I'm Chris Hill. Carl Quintanilla has a front row seat

when the opening bell rings at the New York Stock Exchange. He is the host of CNBC's Squawk on the Street, which you can catch each weekday morning at 9 a.m. Eastern. Carl, good to talk to you. It's great to talk to you again, Chris. Let's look back at 2018 before we start looking ahead to the next year. When you think about 2018, what stands out to you in terms of business stories? You know, I actually, knowing we would discuss this, I tried to make a list.

And I mean, I ran out of paper because it ranges from the macro, like big, like just Trumponomics, tax cuts, supply side, stimulus and all of that, down to the most fascinating corporate stories of, I mean, all year long. CBS Moonves, Musk, Tesla, the dismantling of Facebook, Bitcoin, right? I mean, this was just a wealth of riches all year long. If you're a business reporter, I honestly can't remember a year where it was this jam-packed. Yeah, there really has been an embarrassment of riches if your job is covering business news. I am curious, though, at your use of the word dismantling when it comes to Facebook. I mean, this really is a year where if you think back a year from now, some of the talk around Mark Zuckerberg was, this guy might run for president.

And here we are 12 months later, and maybe one, certainly one of, if not the most dominant question about Facebook is, how much trouble do we think this company is in right now? Yeah, well, I think a lot of that trouble has been priced in, obviously, I mean, stocks, you know 40 off the highs um and although it still had a great run if you bought at the ipo i mean i think trust levels are extremely low i mean i saw a survey today at a recode that of you know which company do you trust the least with your personal information and facebook was number one above twitter by a factor of three or four um at the same time you know he's assembled amazing conglomerate of platforms. I don't know about you, but my wife is on Instagram all the

time. I'm also guilty of that sometimes. And their base is so solid and large that I think we're getting to a point where a lot of money managers are intrigued by the valuation. But in terms of growth, how much can they undo? How many apologies will be enough? I certainly don't think Congress has shown the intellectual rigor to tackle something on big tech the way the Europeans have. But I do think that they've been, you know, if not sufficiently punished, then we're moving in the direction of being sufficiently punished. Has there been a story this year that maybe hasn't flown under the radar, but given what we've talked about in terms of so many big dominant storylines this year,

whether it's macroeconomics or industry focused or individual companies, has there been a story that's been of interest to you personally that maybe didn't get the headlines of Trumponomics or Facebook in the spotlight in front of Congress? Oh, absolutely. There's two. One is the, I hate to put it this way, the insane pace of the growth in government debt. There's a note out today from a D.C. think tank that we've never had a deficit this high when the economy is this strong. Normally, you run a pretty healthy deficit when you run into trouble and there's a recession, but we haven't seen something where the economy is roaring and unemployment is plummeting, and you're still adding levels to government debt. That doesn't get talked about enough. I think the second thing is when you have an employment picture this positive, how is it that 40 percent of Americans don't have $400 in emergency savings or half of the country rates the economy as poor?

Fed Chair Powell has been trying to hit on this. Like, you can have a robust economy, and the so-called trickle-down, especially to rural America, is very, it's a very tough push. And I hope that our policymakers start getting more creative and finding ways to help the less advantaged. So Steve Case and some private sector guys have been working at this for years, but they can't do it by themselves. One of the things you mentioned earlier was Bitcoin, and certainly if 2017 was the year of Bitcoin exuberance, shall we say, 2018 may be the year of cannabis exuberance. When you think about the cannabis industry, figuring that we are here in the United States, unlike in Canada, we are years away from federal legalization. What do you make of all of the investments in and around cannabis here in the U.S.? It's been interesting.

It's been interesting for us to try to, you know, you don't want to fall into the Bitcoin trap because you see these valuations take off and, you know, the momentum players move in and it builds upon itself and you really have to check yourself because you get caught up in the craze, we all do. Cannabis is – at least we have some test cases now. We have – Canada is going to be a very large economy. They adopted it at scale. They got 8 million willing customers.

So I think that's going to be a laboratory to see how deep pockets fund it. We keep asking – we have the Pepsi CFO on our show or the Coke CFO, And we're like, are you ready to put half a billion into a cannabis company? The answer is not yet. You see the liquor industry doing it because beer sales have been so tortured. But, you know, we're just not seeing a widespread adoption. So it's really baby steps. And you've got to be careful not to get too enthusiastic, even though you see large-scale legalization in some parts of the world.

Certainly, the last few months, we've seen some pretty wild swings in the stock market and in individual stocks. And I'm not asking you to reveal anything that's going to get you in trouble with your bosses at CNBC. But I am curious, when you see the market roiled like this, when the market's going haywire, what does that do to your job individually? How does your job get affected when the market goes crazy? Is it just mean more time on the job or does it mean something else? Well, two different things. One is when you're actually on the air and you're in the chair and you come back from break and you were down 200 and now you're down 500. Certainly, you do your best to have a steady hand. One nice thing about the swings we've seen

lately is we're getting a little bit used to 500-point swings, which I know it sounds dramatic. You know, what is that, you know, 20 to 500 points, a 2% move? So, you know, I mean, I think we've been out of practice. We are not used to this. It's been nine years of just, you know, 50 points record high, 50 points record high. That's what it was like, if we forget, one or two years ago. So as liquidity comes in and the Fed is no longer there to hold our hand, we're going to have to learn how to walk again.

I think one danger is that a large percentage of the population of money managers and analysts have never seen a market like the one we're beginning to see. And they really need to get their sea legs because what was abnormal was the past decade. We're getting back to the normal, and we'll see if world economies are prepared to handle the normal. You're listening to Motley Fool Money, talking with Carl Quintanilla, host of CNBC's Squawk on the Street. He also hosts Binge, the online interview series with stars and creators of binge-worthy television, which you can find online at cnbc.com slash binge. The Hollywood Reporter had a story this week. Box office receipts in the U.S. have topped $11 billion so far this year.

By the end of the year, it is probably going to beat the record that was set two years ago. When you consider the rise of Netflix, Hulu, HBO Go, all of the streaming services, are you surprised that movie theaters are still hanging in there and selling tickets at this pace? I don't know about you, Chris, but my family and I went to a theater in here in New York the other night where it's restaurant service dinner and lay flat beds. And that's really the tricks that the distributors are having to rely on now. I do think it's interesting. You think about movie distribution, or you think about retail, like Amazon.

All of the legacy players, the studios in the case of media, the retailers in the case of Amazon, are starting to find ways to pick the lock. They've got their own e-commerce sites. Walmart's figuring out e-commerce and delivery. Disney's going to go with direct-to-consumer. So I think, you know, we have these big disruptive forces in movies and retail, in Amazon and Netflix, and the sandbox is going to start to be shared. So, I mean, you mentioned the box office figure, $11 billion. You know, seven of that, I think, is Disney.

I don't think, I think it's only the second time a studio has gotten to $7 billion in a single year, and Mary Poppins has barely opened. So it really was a year where the old school started to figure out how to play with the new kids. As the calendar gets ready to flip to 2019, what do you find yourself focused on? Is there a company, industry, or economic indicator in particular that you're watching? You know, I think, you know, jobless planes we love because it's so high frequency. You get it every Thursday, although this week's just happened to be low again. Some people are starting to call for the bottom in claims.

You know, has job growth truly peaked? That's going to be the first big story to watch going into the new year. Obviously, this trade thing is – I'm not exaggerating when I tell you that nobody has an edge on how this trade thing is going to finish. And that's really caused a lot of funds to just sit tight. I mean, we're talking just sit to the sidelines. What's the harm? You wait until March 1st, and then you can reassess. But that's a very difficult puzzle to unlock.

And then I think, you know, we've got a bunch of big companies, Chris, that took on a lot of debt. GE, AT&T, Campbell's, all these big names, highly leveraged. I think you're going to hear that 2019 is the year of corporate leveraging. We've heard that to some degree, which is great. You know, pay down your debt. The question is, can they do it fast enough? Can they do it without risking the dividend and confidence? And then what happens if we do get a downturn?

I'm not saying recession, but what if we go from 3% to 2% or 1.5%? Will cash flows be sufficient to maintain a dividend and pay down your debt? That's going to be a big story, very broad, hard to sort of distill in a single piece. But that's going to be a big deal for market confidence and, as a result, asset prices, at least in the first six months of the year. Because you mentioned GE, I want to ask you this. General Electric is one of those, and maybe I'm showing my age here, but GE is just one of those companies. It's been around forever. It's been a blue chip forever. And the wheels completely

came off the wagon in 2018. The people that you talk to, do they look at GE as being sort of in its own bubble, and certainly they have their own problems, but those are contained unto GE? or do they look at that as something that has ripple effects throughout the economy? Because there was a point in time in our country where if GE was in serious economic trouble, the ripple effects were pretty big. And I'm wondering if we're still relatively at that point or if they're just dealing with their own problems. Yeah, I think it's a legitimate question. Certainly, they're not as widely owned as a stock as they used to be. They're not in the Dow anymore. So they're not as influential.

No, they still play in certain areas of commercial paper, for example, that you could argue have ripple effects. I mean, I'm not saying it would be good if they had a serious snag. It would not be good. But it was just – I think it's an example of three things. One is no one likes conglomerates anymore. They're just the last of these conglomerates. Basically, fund managers say, look, if I want to diversify, I'll diversify. You don't have to do it for me.

so give me a pure business to invest in. That was one thing. They got caught on these long-term liabilities. They never expected people to live as long as they do now. And so their costs on liabilities, you know, long-term care went way up. And then it was just an amazing example of, in mostly the case of Jeff Immelt, buying things when they were high and selling things when they were low. And it's just bad portfolio management. And you mix all that together. That's how you come from, what, I guess a fair price would be, say, 30 down to six. But it is. It's a sad story, and it's not a good reflection on how American business should be run. All right, last thing, then I'll let you go. Because I know you love movies,

you're on the board of directors at the New York City Center, which is a hub of arts and culture. You're a Renaissance man, Carl. Is there a holiday movie that you enjoy every year, either something you watch yourself or something maybe you've started to sit your daughters down to watch with you? I'd love to get your answer on this too. For us, it's a twofer of, is it a cliche? I don't know. Home Alone and Elf. They're great. They're just contemporary enough that our kids, my kids who are nine, can sort of figure out, okay, I'm not watching some classic, I'm not watching Sebastian Cabot in 42nd Street. I think those two, and what I love even more is when we saw this week, Vice did a piece on the science behind the booby traps in Home Alone. What would

happen if, in fact, a blowtorch were to blow on your head? But they both definitely get you in the Christmas spirit. So one of the sad passings in 2018 is William Goldman, the great celebrated screenwriter. I believe it is William Goldman who is credited with the classic business analysis of Hollywood, which is nobody knows anything. And one of the reasons I love Elf, which is the movie that my kids and I watch every year is because the business story behind Elf, behind the making of Elf, is proof positive that nobody knows anything.

That, you know, Jon Favreau had this idea with Will Ferrell and the studio fought him every step of the way and now it is a Hollywood, you know, a Christmas classic. I think that's your next book or documentary. The making of the origins behind Elf. I would read that book. You can follow Carl Quintanilla on CNBC's website, cnbc.com slash binge. You can follow him on Twitter. Or, like me, you can watch him every morning on Squawk of the Street.

Carl, have a great holiday. Happy holidays, Chris. Coming up, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money. Christmas is just around the corner. All right, before we get to the stocks on our radar, quick shout-out to NetSuite by Oracle, the business management software that handles every aspect of your business in an easy-to-use cloud platform.

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accounting, orders, and HR instantly right from your desk or phone. So get the free guide, Crushing the Five Barriers to Growth, at netsuite.com slash fool. Welcome back to Motley Fool Money. Chris Hill here in studio once again with Jason Moser, Andy Cross, and Ron Gross. Hey, if you're looking to buy something for the holidays, for the investor in your life, you can check out the Motley Fool's podcast shop. We've got mugs, t-shirts, and more. And everything is on sale for the holidays. Just go to shop.fool.com. That's shop.fool.com. You can get something for the investor in your life, or you can just put that on your list and just give your list to other people. Tell them to go to shop.fool.com

and pick out a little swag for you. All right, let's get to the stocks on our radar. Our man behind the glass, Steve Broido, will hit you with a question. Ron Gross, you're up first. All right, Stevie. Batting down the hatches. CRISPR Therapeutics, CRSP, a development-stage biotech that I own and is also a Fool recommendation. It's a Switzerland-based This company focused on gene therapy using the CRISPR-Cas9 gene editing platform, which I know you're very familiar with. Two other companies, Editas and Intellius, also focus on this technology. You might want to own all three companies, as I do, to diversify your risk.

They've got partnerships with Vertex and Bayer. This is one you buy. You hold for a long period of time. Do not let the volatility scare you. Steve, question about CRISPR therapeutics? Do these biotechs ever actually work out? I have heard so many. I saw the 60 Minutes piece.

It looks incredible. It seems like a home run, and it seems like, inevitably, they never, ever pay off. A lot of them do not. That's a fair sentiment. Jason Moser, what are you looking at? Yeah, they're calling for some showers this weekend. So, put up that big red Travelers umbrella, Chris. Ticker, TRV, Travelers Insurance. This has been one of those stocks where the longer you own it, the better it gets. And if you're going into a period of time where you've got some volatility,

which we may be going into one of those periods here in 2019, I think good insurers are a great holding in anyone's long-term portfolio. Net premiums up 6% last quarter. They continue to maintain a very healthy combined ratio, consistently under $100, which means they're writing a good book. Stock trading at 1.4 times book value today, which is actually a pretty good deal for a reputable insurer out there. Give it a look.

Steve, question about travelers. What do they insure the most? Is that home insurance? I believe it is home and auto, but they do all sorts of things. Andy Cross. Cintas, the provider of uniform rentals for, say, facilities here in our building and many, many other corporate clients around the country and around the globe, reports earnings next week. Estimates for the earnings are up 31% on top of almost 6% sales growth.

Stocks have been a monster performer over the last decade or so, up 26 per year for the last eight years. So I want to see what is happening with wage pressure. That's a big issue with them. And the ticker? C-T-A-S. Steve? Why do the uniforms need to be rented?

Why can't they just be purchased? Well, because you've got to clean them and, like, you know, you don't want to deal with all that stuff. Just outsource it to Cintas, Steve-o. Steve, you got a stock for your watch list? I think I'm taking a look at Travelers. Hey, now. I think I'm taking a look. All right, Jason Moser, Ron Gross, Andy Cross.

Guys, thanks for being here. Thanks, Chris. That's going to do it for this week's show. Thanks for listening. We'll see you next week.