Motley Fool Hidden Gems Investing - How to Create an Unfair Advantage

Episode Date: March 9, 2018

Investors cheer the latest jobs report. Toymakers tank on a possible Toys R Us liquidation. Cigna shakes up the healthcare industry. And Costco helps consumers prepare for the apocalypse. Plus, marketing consultant Steve Miller talks about his new book, Uncopyable: How to Create an Unfair Advantage Over Your Competition. Learn more about your ad choices. Visit megaphone.fm/adchoices

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I'm Chris Hill, and joining me in studio this week from Million Dollar Portfolio, Jason Moser and Matt Argersinger, and from Total Income, Ron Gross. Good to see you as always, gentlemen. How do you do? We've got the latest headlines from Wall Street. We will get you ready for the zombie apocalypse. And as always, we'll give you an inside look at the stocks on our radar. But we're going to start with the big macro.

The U.S. economy added more than 300,000 jobs in February as the unemployment rate holds steady at 4.1%. Matty, in terms of Wall Street's reaction, what a difference a month makes. I know, Chris. I'm kind of confused. Because I thought it was a strong jobs report last month that caused all this vicious volatility we had in February. And this month's job report was even stronger. So, I really don't know what's going on, except you have to conclude that really overreacting to these macro headlines is just probably something you don't want to do as a long-term investor. This particular report was very strong. Retail jobs up 50,000, construction jobs up over 61,000. I think

it's because wages didn't rise as much as some of the pundits were expecting. That's why the market was rallying on Friday. Yeah, Jason, the retail number was really pretty surprising, considering the narrative we've had for years about Amazon taking jobs. Yeah, well, who knows how that's going to actually turn out at the end of the year, because I think the story with these reports always materializes a month or two after they're reported. It's the adjustments to the numbers, which I think is what we need to pay more attention to. But yeah, I mean, I think it's interesting to see how the narrative changes so quickly now from, you know, we're

going to look at maybe three or four rate hikes this year, to now we see some folks out there even saying, maybe we don't need to worry about a rate hike just yet because inflation isn't quite stoked up as high as they thought it might be. And once Amazon puts 50,000 people into my neighborhood, those retail numbers will even look better. But I don't envy the Fed bringing us in for a soft landing or easing up when they need to ease up. It's a balancing act that is tough. Inflation and GDP and interest rates, not always a science. Right. And just remember, the market dropped 11% based on the news last month. It's rallying on this news. Just buy stocks

and hold them for a long time. Just for the love of it. Let's move on to retail. Costco and Target both out with their latest reports. Costco's second quarter profit rose 36%, while Target's fourth quarter revenue was up 10%. Ron, you look at both these reports, there are positives there, but shares of both Costco and Target falling a bit this week. What's interesting is, I think both these reports were actually pretty decent. Costco's shares perhaps held up a little bit better than Target's. I think the differentiating factor here is that both companies needed to spend rather heavily in order to compete. And who's the big dog in the fight? Is that

the saying? It is now. I think it's one of the sayings. It's Amazon. And, you know, they had to spend on things to bolster their e-commerce, and they needed to lower prices. And the big difference here is that Costco was able to maintain their margins, even in the face of lower prices, as a result of the power they have with suppliers, and Target was not able to do that. So, Costco was able to grow earnings, took a hit on earnings, and therein lies the difference. Yeah, I think we have to wonder when we're going to hit the ceiling as far as

Costco's memberships go, though, because I think they reported 49.9 million member households this quarter. That was versus 49.4 million just a quarter ago. So, that slowdown is happening. That's what we've been talking about for a while. So, while they have that 90% plus retention rate, which is very admirable, the market obviously is looking forward. And I don't know that The growth is really there for Costco. That's got to be a concern for investors. Meanwhile, not as big a story, but worth noting, we've talked before about Nordstrom, the Nordstrom family looking to take that company private. They took their first shot at it this week, Ron, and got rejected by the board. I think it might have had something to do with the fact

that the offer from the family was actually lower than what the stock was trading at per share. So, in Wall Street parlance, that's called the take-under, rather than the take-over. And it's kind of shameful. The Nordstrom family controls more than 30% of the shares, and maybe they thought they could pull a fast one and get it on the cheap. And who wouldn't want to buy something as cheaply as possible? You can't really fault them for that. But you can fault them for treating shareholders perhaps not as nicely as they could have. Yeah, when the stock's at 52 a share, and you come in and say, OK, we'll buy the company out at $50 a share? I mean, even I'm smart enough to turn that one down.

That was an opening gambit. We'll see where this goes. At least you've got a floor on the stock right now, if you want to be conservative. No fun this week for the toy makers. On Friday, shares of both Mattel and Hasbro were falling on the news that Toys R Us may be liquidating its U.S. operations sooner rather than later. Jason, I think we all know that Toys R Us was not in great financial shape to begin with, But this does not go in the plus column if you're Mattel or Hasbro. No. I feel like we've been talking about this for a while. We could have probably just gone ahead and said Toys R Us is liquidating about six months ago

and just kind of put this story to bed. But with that said, I think it's important to know that life without Toys R Us can and will go on. But it's a much different market today in the toy market than the one that we all grew up with. So it is not going to be without its challenges. When we look at Hasbro and Mattel, they are essentially in the same boat as to where they sell most of their stuff. Walmart accounts for around 20%, Toys R Us and Target about 9% each. So, then you have to sort of look at these two businesses and see which one is going to be able to deal with this sort of shift better. And Hasbro clearly is the winner there.

Mattel has been dealing with more receivables exposure on that Toys R Us side. And we've seen, certainly, the idea batted around more than once that maybe Hasbro and Mattel would merge at some point. I think Mattel is still dealing with a lot of cultural issues as well as some poor management decisions, and I think that's why you're seeing the market selling off Mattel more so than Hasbro. Either way, Hasbro, I think, is going to be fine, but still, challenges remain. Yeah, I don't think we can dismiss this as easily as we did roughly a year ago, I think, when Sports Authority was going on a business liquidating, and we thought, well, it's only a small percentage of Under Armour's

sales, so it shouldn't hurt them too bad. But what we saw was, at the margin, this actually hurt Under Armour pretty bad. And it hurt Nike a little bit, too. Right. And I just feel like Toys R Us feels bigger in the space. And by the way, it does feel like an end of an era here. I remember growing up, and Toys R Us was just the place. And it's not there anymore. And I don't even know where you go to buy toys these days. I don't have kids, so I don't know. But going to Walmart and Target to buy toys doesn't feel the same. Well, I want to go back to something that Ron had touched on. Ron, when you were talking about Costco and how they were able

to maintain their margins. There are a lot of businesses out there that want to get their products into Costco. And Costco has a little bit more power when they're sitting down at the table to negotiate with any number of companies. Toys R Us is going away. If you're Walmart, if you're Target, your hand is strengthened a little bit here. And I kind of feel like that one of the winners in Toys R Us being liquidated is Walmart. Because now, maybe because of all the shelf space they have, because of all their locations, don't they have a better negotiating position now with Mattel and Hasbro? I would think yes, but then there's always Amazon, who will be happy to take your business

if Walmart plays too heavy of a hand there, and there's always that card you can play. I think Ron hasn't gone one segment without mentioning Amazon yet. It's like every single sentence. Is there the next story we're going to do? I think we'll talk about it again. There you go. Let's see if we can get through it without mentioning the A-word. Not happening. Another big deal in the healthcare industry. Insurance giant Cigna is buying Express Scripts in a deal worth more than $50 billion.

Express Scripts is the largest pharmacy benefits manager in the United States. Cigna shares down more than 10%, Ron. Do you look at that and think, will that make sense given the size of this deal? Or do you think that's an overreaction and maybe a buying opportunity with Cigna? Certainly not surprised to see the stock down, because that typically happens. The acquirer stock usually sees a hit, and then the company being acquired gets a premium, and the stock goes up. Perhaps 10% is a little bit of an overreaction. But consolidation continues in this industry. You see insurers and PBMs teaming up, whether it's CVS and Aetna. United Health owns OptumRx. It's really only one relatively large PBM that is private still

or independent, and that's Prime Therapeutics, a name that does not roll off the tongue, at least in my world. But you've got to consolidate in this industry to compete. And as if it wasn't hard enough to compete, you have the A-word, you have Amazon, Berkshire, and JP Morgan sticking their thumb in your eye every two seconds because they want to get in this game pretty bad as well. Whenever I see a deal involving any business that is the largest in its category, and in this case, it's Express Scripts being the largest PBM out there, my mind automatically goes to Uncle Sam. Is there any chance that this deal gets shot down for regulatory reasons? Or do you think, given Cigna's size relative to other insurers out

there, they're probably in for smooth sailing? I think it will be looked at very closely, because I've read a number of articles that are concerned that as the number of independent PBMs goes down, the chance of prices being hiked on the consumer goes up. And that is the primary thing the Department of Justice wants to make sure does not happen. So, it's not a gimme here. They're going to look close. Coming up, the hits just keep on coming for Blue Apron. And we don't mean that in the good way. Stay right here. You're listening to Motley Fool Money. Hey, if you're looking to get a mortgage, here are a couple of tips. First, boost your credit

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Oh, I'd like to be that man. He's got money to burn. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Matt Argesinger, and Ron Gross. Strong second quarter report for United Natural Foods. The food supplier's profit and revenue both came in higher than expected, and Jason, and stock got a nice little bump, too. Yeah, this was a really important quarter for this company, I think, in the sense that the market is able to now gain a little bit more clarity into how the Amazon Whole Foods deal is playing out. When you look at United Natural Foods' earnings, they refer to that Whole Foods segment, that's the Supernatural

segment. I feel like there's probably a Netflix show there or something, but those sales in that segment were up 19.2% from a year ago. That's the highest quarterly growth rate for for this company since the fourth quarter of 2013. And even that quarter included an extra week. So, all in all, a good quarter for UNFI. And knowing that Whole Foods is responsible for about 35% of their overall sales, I think now we're getting an idea that maybe they're going to benefit from the volume side with this Amazon deal. Now, the flip side to that, though, is big customer like Amazon, Whole Foods, they're going to probably command a little bit more in pricing. And this is a razor-thin margin business to begin with.

So, a little good, a little bad. I'm not sure I'd be sinking any money into United Foods. I think your better bet is to probably just buy shares of Amazon, Ron, and just get on with life. The next story cannot contain that word. Oh, you wait! It's worth noting that United Natural Foods' deal is signed through 2025. So, they will be the supplier for Whole Foods and Amazon through 2025, unless Amazon decides to go to the table and try to renegotiate. Tough week for Blue Apron. This week, Walmart announced it is launching meal kits in more than 2,000 Walmart locations this year. They've been testing it in about 250 so far.

Kroger is also testing their own meal kit service and shares of Blue Apron down nearly 20% this week, Matty. Well, you mentioned Walmart and Kroger getting into the business. Oprah is also getting into the business with Weight Watchers launching their own meal kit. No doubt, these are credible threats to Blue Apron and HelloFresh and some of the existing legacy meal kit companies. The other side you can take on this, though, is that there is a market here. They're validating this, that meal kits is a thing. Blue Apron has 750,000 customers. Those customers are coming down a little bit, but still a lot of customers. My wife and I, for example, love HelloFresh. We've been doing it for over

a year. I feel like Weight Watchers, Walmart, Kroger, and I think Amazon Whole Foods is kind of doing, yeah, I got it. It's validating the market in a lot of ways, saying, hey, meal kits are a real thing, there's a demand for them. The problem is, this is a business with huge fixed costs and even bigger variable costs when it comes to food, labor, packaging, shipping. There has to be consolidation in this market. There can't be a dozen meal kit companies out there, they just will all be unprofitable and go away. And so, at some point I expect there's going to be some consolidation. You're going to have two or three big winners probably at some point. And Walmart with distribution, or the A-word with distribution, those are

probably your bigger players in the end. Well, and you mentioned the customer acquisition costs that Blue Apron has. Kroger doesn't have those in the same way. Neither does Walmart, for that matter. Great point. I kind of feel like these meal plans, this is like the new video streaming offering, right? A year ago, it seemed like everybody was announcing, oh, we're going to get into streaming video. Now, everybody's going to, hey, we're going to do meal plans. It's neat in theory, maybe, but it's a very cutthroat industry. Tough to make a living doing that. Could I interest you in the stock if Blue Apron announced that they were adding

the word blockchain to their name? I would at least take a second look. Bojangles stock got a boost this week when CEO Clinton Rutledge abruptly resigned for personal reasons. Former CEO Randy Kibler is stepping in as interim CEO while Bojangles board looks for a permanent replacement. Jason, are you interested either in the job or the stock? If I had a card as the CEO, it would just be CEO the Jangler. I think the toughest part for Bojangles is, they literally do have all of their eggs in one basket. It is just that one concept in a market where it seems like we're witnessing a lot of consolidation to have a number of different brands under one umbrella. Think about restaurant brands

with Burger King and Popeyes and Tim Hortons. Yum! Brands, obviously, with Pizza Hut, KFC, Taco Bell. They are at least kicking this around that perhaps Inspire would be looking to acquire Bojangles. Inspire has Arby's, Buffalo Wild Wings, and R Taco. So, I do feel like, when you look at this space, it's very competitive. KFC and Popeye's Kitchen are bigger companies, and they're bringing better sales numbers to the table than Bojangles is today. So, it may be just a matter of time before this is a concept that's rolled into a bigger company. I was going to say, this absolutely seems like a profitable concept under someone else's umbrella. And you and I have talked about

this before. You grew up in the South. Bojangles was very much in your wheelhouse. Not so much for me, growing up in New England. But it really does seem like a concept that works. It is very, very good food. I mean, if you like chicken and biscuits and all those southern sides. Who doesn't? What kind of inhuman monster doesn't love a bojangles? They're out there, Chris, believe it or not. Guys, let's face it, we all want to be prepared for the zombie apocalypse, who has the time to do all of the shopping? Good news. Costco is selling emergency food

kits that can feed a family of four for one year for $6,000. Your Costco kit comes with freeze-dried broccoli, corn, dehydrated apples, and other grains and proteins that have a shelf life for up to 30 years. Ron, don't tell me you're not interested in this. Who wouldn't be interested? This is good stuff. But, you know, after I consume the 42 cans of pinto bean flakes and the eight cans of butter powder, I'm going to need 144 cans of Pepto-Bismol there, and a can opener, too, would be nice. Is that what you're adding? Yeah, I'd like to add that, please.

Because I looked at this, and I thought, you know, to me, this is one of those things where, at some point, Jason, you have enough things in this kit that I'm going to say, you know what? I'm going to buy that now. Maybe. I mean, I see this is sort of geared towards the family, but Chris, I didn't see beer anywhere on that list. And that is going to be shelf-stable for a year, so I'm throwing a few 12-packs in there. That'll at least get you through the tough times. Forgive my ignorance, is there a Kirkland private label beer? There is, but I think Mac probably would be the man to really confirm that. I'm quite certain there is a Kirkland private label beer. I've seen it.

Matty, if you're adding one thing to this kit to at least get you more interested, what are you going with? Well, I think if you're living in some dark shelter in some post-apocalyptic world, it's pretty depressing. You're going to need to remind of the trivial things in life. So I think a DVD set of all nine seasons of Seinfeld, look, you can watch it over and over again. It never gets bored. You can watch it for more than a year. I think that's a great addition, assuming you also have a DVD player.

Living the apocalypse with George. Oh, my goodness. Get you through it. Let's go to our man behind the glass, Steve Broido. So, Steve, one, are you interested in this kit just as it exists right now? I don't think so. And I'll tell you why. It's because I can't get into a Costco parking lot as it is.

I'm imagining the zombie apocalypse and everyone is rushing to get their survival kit and no one can park in the parking lot anyway. The great thing is on the site it says if you don't want to let your neighbors know that you're preparing for the apocalypse, they come in boxes that are very discreet. But it's like hundreds of pounds of product. It's 1,800 pennies. You're not sneaking that vibe, Mr. Jones, next door. Here's another tidbit from the Costco website, and I'm quoting here. Enjoy the comfort in knowing you have the essential foods your family will need to survive an emergency or natural disaster! I so want to meet the marketing person at Costco who came up with that line.

Enjoy the comfort. Moreover, that person's boss who said … As the world's coming to an end. Smith, I need you to work on some copy for me. For me personally, throw a little Cap'n Crunch in there. The real stuff, not the Kirkland brand. But you only have powdered milk. I'm going to make it work.

Jason Moser, Matt Argesinger, Ron Gross. Guys, we will see you later in the show. Up next, we will talk unfair advantages with author Steve Miller. Stay right here. This is Motley Fool. It's a competitive world. Welcome back to Motley Fool Money. I'm Chris Hill. Steve Miller is a business advisor, professional speaker, and the author of seven books. His latest is Uncopyable,

How to Create an Unfair Advantage Over Your Competition. He joins me now from the West Coast. Steve, good to talk to you. Chris, nice talking to you, too. I have to be honest. As an investor, I like to look for companies that have unfair advantage. I know that fairness is one of those things we were all taught as children to try and strive for. But I think when it comes to businesses, isn't that what we're all looking for? Yeah. In the business world, and I'm not like you guys. I look at businesses from the perspective of competitive strategy. That's where I come from.

And, to me, it's ludicrous to think that there are rules out there. To me, business is a street fight. You know, you want to develop literally a monopoly in the mind of your target market. And, otherwise, you're fighting for the same crumbs that everybody else is fighting for under so-called unwritten rules that people seem to feel that they should be fighting under. And I go, no, that's baloney. I want to have a complete unfair advantage. So how do companies do that?

How do they set out to create an unfair and yet legal advantage? Because at some point, if you get big enough and successful enough, unfair becomes Uncle Sam knocking on your front door. Sure, sure. Yeah, well, like you say, you don't want to run into any legal problems. And the thing to first understand is that most companies are unwittingly competing under the same rules as everybody else. And, you know, it's sort of like they tell you to get out of the box. You know, when they say, get out of the box, that's what you should be doing, get out of the box. Has anybody ever explained to you what that box is?

No. No, nobody. But, see, I've come up with my definition of what the box is. And so, like, let's say the box is, for argument's sake, let's say it's roller coasters, okay? And what I mean by that is that when people think of roller coasters, they have this box that kind of has all their memories and thoughts and experiences with roller coasters in their life. And so all of the roller coasters are in that box. Every roller coaster that is competing for their time is in that box. So if they're roller coaster aficionados, they're thinking in terms of, you know, Six Flags, you know, Magic Mountain, or they're thinking of Universal Studios or Coney Island or something like that or somewhere in Asia.

And they're thinking of these roller coasters that are these crazy, wild roller coasters. Well, then there was a company who came along and said, well, we want to have roller coasters for our customers. customers but gee we don't want to be in that box competing with all the other roller coasters in that box because that's where they all are they're all using the same terminology oh it's we're the fastest we're the tallest you know we're the scariest it's all that same terminology you know and this other company started to create roller coasters at their amusement park but they decided instead of calling it a roller coaster they would call it space mountain uh or they would call it the matterhorn and what and when you really think about it space mountain

is just a roller coaster but they created a they created kind of like new rules so what so instead of being in the box with all the rest of the roller coasters what disney did was they actually built their own box and in that box they said all right we've got the standard roller coaster but Now what do we do with it that people will not even, they won't even think that it's a roller coaster? I mean, how many times have you heard people refer to Space Mountain as a roller coaster? In my life, nobody's ever done it. You know, it's a ride into outer space. That's what it is, you know.

And so when I'm working with clients, I always say, look, you know, you've got to have the basics that are really, really great. so you get you know if you if you build a roller coaster then it it it has to be a decent enough roller coaster uh it might not be the world fastest might not be the highest or anything like that but it's got to be a decent roller coaster okay so now what do we wrap it in and uh and i kind of call that uh element x uh where i say all right you've got your product you've got your service you've got your price those are the three basics that people have competed under for years, but now you've got to wrap it in something else. And is it the customer experience that they're wrapping around that? And that's kind of what Disney does. They create a different type of

an experience that is wrapped around a fairly common product. You know, Apple has done that for years with the design experience, you know, the product experience where they have the original Macintosh and the mouse and the interface and things like that that were far, far different from what was available through like Microsoft and Windows and things like that. So it's, you know, obviously it's not super easy to do, but that's kind of how you have to approach it. So one of the things you write about in your book that you make very clear is that even companies that achieve an unfair advantage, they need to recognize that it's not going to last

forever. It will buy them some time and only some amount of time. I'm wondering, though, since you mentioned Apple, to what extent, if any, do you consider cash to be an unfair advantage? Because when I look at companies like Apple and Alphabet, beyond the fact that they have been successful at building, in Apple's case, one heck of a phone, and in the case of Alphabet, the best search engine, the go-to search engine, that if it disappeared tomorrow, people would start freaking out. They have also amassed massive piles of cash. Do you consider that to be an unfair advantage? To a certain extent, but I don't think that they've actually been using it very well. And I'm not, like I say, I'm not looking at it from an investor perspective. I'm looking at it from a competitive perspective.

And of those two, I think Alphabet has the far bigger advantage right now over an Apple. Because, you know, Google, when it first came out, it was a game changer. When ultimately they created Alphabet, I thought that was actually pretty smart because what Alphabet, in my perspective, Alphabet is like, you know, Berkshire Hathaway. They've got all these different companies underneath Alphabet. They've got the side that is making all the money, the Google side. They've got the other bets going on with the moonshots. And that's where I think they have the advantage because, you see, they are actually building all these new boxes. Not all of them are going to work, but if you do have a moonshot hit, well, then you might have another Google on your hands.

On the flip side with Apple, while Apple has, you know, they have been a category killer and a category creator, I should say, you know, with music and smartphones and stuff like that. But where is there the new category today? I'm not seeing it. And that's why when I see them sitting on all this cash, I'm thinking, why aren't they out there making some big bets like Alphabet is? Let me ask you about a couple of the other big tech companies, and you tell me how uncopyable you think they are or aren't. And I'll start with Amazon. um amazon to me is uh it's amazon is what apple used to be um you know with steve jobs steve jobs you know pushed it pushed apple to create these new categories jeff bezos

is constantly pushing you know what else what else can we do for the consumer I met him briefly at TED a few years ago, and I asked him about, you know, what's the end game? And he goes, I don't know. He said, if it can be sold online, we're going to try to find out if we can sell it online. And I thought that was pretty precious. And the fact that he was able to start going out and put it, you know, he also figured out that you need to put golden handcuffs on your customers. You know, so when he came up with Prime, you know, that was a really, really smart move.

And, you know, and golden handcuffs are the best way to be uncopyable. Because when you can capture, you know, a customer that literally, you know, they in their mind, it gets to a point where they think they're going to lose if they switch to another company. then you've got to – that's that unfair advantage that I'm talking about. So they keep giving people who are in prime different stuff. So like now the new retail with Whole Foods, there are benefits for being a prime member when you shop at Whole Foods that other people don't get. And that's just making those golden handcuffs stronger and stronger on them. But I would be nervous if Bezos left or when he dies.

That's because Bezos is behind all this. When you look at Facebook, another hugely successful company, but it seems just when you look at the numbers of it, while Google is making a lot of money off of advertising, so is Facebook. Google has – or Alphabet has their whole other division. And Facebook seems to be playing in the same types of arenas when you think about what they're doing with Instagram and what they're trying to do with Messenger. Where is Facebook on the uncopyable scale for you? I think Facebook is uncopyable in the information they have. You know, they've got demographic, psychographic information of their database that is unbelievable. The problem to me with Facebook is that my daughter, my 25-year-old daughter, is only on Facebook to communicate with mom.

and her friends are either not on facebook at all or they're only on because their parents are and i that that's because that's been a question i've been asking young people for a long time ever since i started hearing that young people were moving away from facebook they were yeah you know a lot of them are using messenger and things like that but they're not But Messenger is not the only game in town. A lot of them are using Snapchat and Instagram and those that – but it seems like they're short-term relationships for these kids. And it's not just the millennials.

It's also the ones behind them, too. So I look at it as being who's the next customer for them because, you know, if my wife is on Facebook, well, you know, it's not very long before she starts getting social security checks, you know. And pretty soon, the boomers are, you know, going to start dying. When you look at business news now, and you look across different industries, and you see whether it's a restaurant chain or a tech company or an industrial company, you see different businesses coming out with announcements. Do you now put a lot of this business news through the uncopyable filter? Do you look at announcements from companies that, hey, we're going to start

doing X? Do you look at that and think, oh, gosh, you're making a mistake. That's not going to have the outcome that you want. Yeah, I can't help it because that's just the way I see the world now. You know, I've been doing it for so long. And, you know, fortunately for me, I mean, i learned from two very very smart people to do that you know one was a partner of my dad back in the day of uh when my dad was doing the creating the first eight track tape player uh but edwards deming was involved with that and you know he and i was a teenager at the time and he taught me about that benchmarking is only halfway good if you because if you only study your industry, then you're going to be stuck in the, in your industry thinking like everybody else.

And he used to say, you got to study outside your world. And Jim Nordstrom, when he was alive, president of Nordstrom, hired me to consult for them one time. And I had no retail experience whatsoever. And I said, you know, I don't know what, I don't know anything about retail. He said, that's why we're hiring you. And so I learned from them that, you know, to look at it like that. And so when I see announcements from companies nowadays, I'm always thinking, okay, is this copyable? Is this something that is really not unique? Is this something that is not a game changer? Or if it really is a unique idea right now, how long will it be unique?

And so I can't help it. That's just the way I see everything now. Do you have an 8-track player that's working in your home right now? Of course I do. It's the one I had in college. It's still working? Like, you're not worried, gosh, if I wear this out, I'm not sure I'm going to take it to get repaired? Yeah, I have this wall of kind of artifacts, you know, over the years.

You know, you asked about Apple. I mean, full disclosure, I own Apple stock, and I've been an Apple guy from the beginning. So I have an old Apple IIc, I have an original Mac in there, and I've got my Learjet Stereo 8-track LP turntable out there as well. His latest book is Uncopyable, How to Create an Unfair Advantage. Steve Miller, thank you so much for being here. Chris, thank you so much for having me. Up next, we're giving an inside look at the stocks on our radar. This is Motley Fool Month.

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, once again, with Jason Moser, Matt Argersinger, and Ron Gross. Time to get to the stocks on our radar. We'll go to our man on the other side of the glass, Steve Broido, to hit you with a question. By the way, also, sitting in with Steve on the other side of the glass this week, it's the Core family, up from Richmond, Virginia, Linda, her son Spencer, and Will. Thanks so much for hanging out with us. Ron Gross, you're

up first. What are you looking at this week? I've got Amazon. No, I'm just kidding. I've got American Tower, AMT. They're a real estate Investment Trust, one of the largest owners of wireless communications towers in the world. Critical part of the infrastructure of our digital revolution. Great unit economics, great yield, and dividend growth. They've increased their dividend for the past 23 consecutive quarters. Dividend currently stands at 2.1%, and the stock looks good. Steve Broido, question about American Tower? Well, I'm a shareholder, and my question is, who are their biggest competitors? Because American

Tower has been a rock star performer. I would say the two other big guys are Crown Castle and SBA Communications. Those three combined make up a bulk of the industry. Jason Moser, what are you looking at this week? Yeah, talking about Ellie Mae, ticker E-L-L-I. And as we wrap up earnings season, Ellie Mae chalked up another good quarter. Their software platform and compass now has over 242,000 users. I like the dual revenue stream in subscriptions and transactions. And just sort of an example of this, in the quarter, revenue for the company grew 17% in the phase of mortgage origination volume actually falling 19%.

And, you know, something that caught my interest the other day, and I can't believe I've got to do this, but Amazon, yes, Amazon is looking to hire someone to lead their newly formed mortgage lending division. And so, I just can't, I'm not connecting the dots here, Chris, but I can't help but think about the possibilities as Ellie Mae is moving their platform over to Amazon Web Services. maybe there's a partnership in play here in the future. I just don't know. Steve, question about Ellie Mae? I was reading something from Schwab about adjustable rate mortgages. Do you have any

interest, if you were buying a house today, in an adjustable rate mortgage? Does it make sense, do you think? It makes sense if you know that you're going to be in that home for a short period of time, or you know you're going to be able to refinance. But I sure do like the certainty of a low-rate, 30-year deal. Matt Argersinger, what are you looking at this week? Well, if you're looking for good short opportunities, about a year ago, I talked about the auto parts retailers. And I look like a genius, because after I talked to them ... You are a genius. They fell about 20%, but they've all bounced back. And I think the worst of the

bunch is Advance Auto Parts, ticker AAP. Just to give you an idea, management was really excited about 2018 on the last conference call, yet they're guiding for same-store sales of negative 2% to 0%. So, not exactly a growth business. And of course, lots of short-term problems with Amazon, I had to say it, affecting their sales. But long-term, ride-sharing, electric vehicles. It just looks really bad for the auto parts retailers. Short them all. Imagine how low that comp number would be if they weren't excited. Steve Broido, question about Advance Auto Parts? How do you feel when you go to an Advance Auto Parts or one of these stores,

and there's about 3,000 people in the parking lot all working on their cars simultaneously? It just feels intimidating to me. How do you feel? Your take. You know, I've never actually gone to one, and I never plan to. So, I can't give my take on it. I don't know. Steve, have you ever changed your own oil? Do you know anything about cars? No, very little. But I've been to, I think, an Advanced Auto Parts when I needed a battery, and they did it for me. They did a great job. Get the ball bearings. It's all about ball bearings these days. Three stocks, Steve. You got one you want to add to your watch list?

Well, I own American Tower, therefore I will own American Tower. Nice. All right. Ryan Gross, Jason Moser, Matt Argersinger. Guys, thanks for being here. Thanks, Chris. That's going to do it for this week's show. Our engineer is Steve Broido, our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.