Motley Fool Hidden Gems Investing - Market Rebounds and Disney Reopenings

Episode Date: May 29, 2020

The total number of unemployment claims climbs above 40 million. Costco slips on earnings. Salesforce sells off. Dollar Tree and Dollar General rise on strong growth. Williams-Sonoma serves up a surprise. And Hertz Global files for Chapter 11. Motley Fool analysts Ron Gross and Jason Moser discuss those stories, weigh in on the latest from Ulta Beauty, and share two stocks on their radar: Intercontinental Exchange and Bill.com. And we talk with Motley Fool contributor Rick Munarriz about Disney World's reopening, HBO Max, and the streaming wars.   Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's why they call it money. The best things in life are free. But you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill. Joining me this week, Jason Moser and Ron Gross. Good to see you, gentlemen.

Hey, Chris. We've got the latest headlines from Wall Street. We will dig into the entertainment industry and as always, we've got a couple of stocks on our radar. But we begin with the market writ large in a week where the unemployment number hit 40 million over the past 10 weeks. Ron Gross, we also have the S&P 500 basically where it was seven months ago when unemployment was so much lower. Back in late October, that was an all-time high for the market. S&P 500 is still down about 7% year-to-date, but I continue to be surprised and a little bit confused by how well the market is doing. Yeah, a stone's throw from kind of getting

closer to even, NASDAQ actually up. Conventional wisdom at December 31st said the market was overvalued at about 23 times earnings. That was when we had historic low unemployment. and earnings that were really solid. Now we have not that, and the market's getting back to where we were there. So, there's a lot of folks that are concerned that a market has gotten ahead of itself. I love the optimism of hoping a vaccine comes and hoping we get back to business, but we're not going to get back to the levels we saw at December 31st anytime soon. So, for the market to be approaching those levels, seems to me that it's getting a bit ahead of itself. And I hope I'm wrong, because I love when the market goes up.

Jason, what about you? Well, I mean, yeah, we fell really far, really quickly, right? And we've certainly gained some of that ground back. I mean, I think Ron's right. Probably, generally speaking, a pretty glass-half-full attitude out there today, in that there is, you know, at some point or another, you know, we'll be able to open back up and kind of get back to normal. If you look at beyond the stock market, I saw some really interesting information this week. The personal savings rate, according to the U.S. Bureau of Economic Analysis, just hit 33% in April. And if that sounds abnormally high, it's because it is abnormally high. I mean, that's a number that normally is in

a 5% to 10% range in really good times. And that came as ultimately spending declined in April by about 13.6%. And so, you can see at least some folks out there trying to prepare for the worst and hope for the best. But when you look at it from the greater economy, the U.S. consumer accounts for more than two-thirds of the economy. So, then the big question really becomes is, is this savings rate? I mean, I don't think that's the new normal. Is it more due to the situation at hand? I would argue that it is. But perhaps, you know, maybe something that comes from this is a renewed focus on saving and being prepared, a little bit of a different philosophy on how people handle their money.

And ultimately, I think that would be a good thing, regardless of what the market's doing these days. Yeah, those savings rate numbers took me by surprise as well, Jason. I'm going to be really interested to see where they are at the end of May, when the unemployment rate really started to get crazy and folks really started to struggle. Did money have to come out of savings? Did money go into savings at the same rate? I find it hard to believe because lots of people are hurting. But if there is a lot of money on the sidelines and if spending has declined somewhat permanently or perhaps just gone down a bit, money on

the sidelines actually typically is a good indicator for the stock market because people don't want to save money just in a zero interest rate savings account, they typically put it to work, at least those that feel comfortable with the increased risk. So, that could be interesting if we have lots and lots of cash on the sidelines. The institutional cash on the sidelines will be mostly what drives this money. So, it'll be interesting to see how that looks as well. But I can't imagine May looks the same as April. Yeah, I think you're probably right. Another interesting statistic out there, the amount of high-grade corporate debt that's been issued this year, just past $1 trillion. That's double

the pace of last year. And so, you know, when we get back to talking about these market levels and what is really behind pushing this market up, I mean, it's a bit of a simplistic view. But I mean, when you think of inflation, I mean, you're thinking of excess dollars chasing ultimately a limited supply of goods, right? I mean, you got people in there bidding up those goods and prices rise. So, I mean, there could be some sort of dynamic like that in play with the market, given how much our money supply has expanded as a country. There's a lot more money in the economy today, given the Fed's actions. And with interest rates so low, and we've seen clearly this corporate debt has just hit new highs, I mean, maybe that's part of it. There's just a

lot of money out there and there's no other place to really chase that return. I mean, fixed income just ain't going to cut it for a lot of folks. And so maybe there is something like that at play here, but that's not something that's sustainable either, right? Right. The injection of trillions of dollars of liquidity into the system. If economics 101 taught me anything, it means it should have consequences. Now, back in 2008, 2009, we were saying the same thing and hyperinflation did not rear its ugly head, so I'm scratching my head about that. But theoretically, there should be consequences here down the road. However, I mean, our house was on fire, and we had to put out the fire, and so the stimulus was necessary, even if there are consequences down the road.

All right, let's get to some earnings news, and we'll start with Costco. Shares down a bit on Friday after Costco's third quarter report featured only $37 billion worth of revenue and same-store sales growth of nearly 5%. Ron, this seems like a good quarter, and this seems like a little bit of nitpicking. I agree with you, Chris. This quarter was absolutely fine, marred by the COVID-related expenses that everyone had to bear. It's just there was no choice. So when you see comp sales up, excluding gas and currency, of almost 8%, that's a really strong number. Internationally, they were up 12%, really strong. Shopping frequency was down, as expected, everyone was sheltered in place, down about 4%, but

average transactions were up 9%, and that feeds into this wonderful e-commerce number of a 66% increase, which is very, very strong. All of these good numbers, despite the fact that the optical departments, the hearing aid department, the photo department, the food courts were closed for most of the quarter in the stores. Gross margins held up, membership fee income up 2.2%. The all-important renewal rates, because let's remember, Costco makes the majority of its money by charging us a membership fee, so very important for those renewal rates to stay strong. Ninety-one percent renewal rates in U.S. and Canada, overall in the world, 88%. Just great numbers, $280 million of COVID-related expenses, nothing

you can do about it, still generated net income of over $800 million. First quarter revenue for Salesforce came in 30% higher than a year ago, but guidance was not what Wall Street was hoping for, and shares of Salesforce down 5% on Friday. Jason, Mark Benioff has done a great job running this company. Is the guidance cause for concern, or do you view it more as a one-time speed bump? Now, I certainly would view it more as a one-time speed bump. I mean, we talk about companies that are going to emerge from this even stronger. Salesforce is certainly one of them. I mean, they have the market-leading position in customer relationship management, and that should only get stronger thanks to the investments that Marc Benioff continues to make, not only in the business, but it's his every-stakeholder mentality, right? He's not just thinking about the company,

he truly is thinking about the world, his employees, the customers, and everywhere in between. And when you look at the numbers, I mean, Salesforce does dwarf the competition from companies like Oracle and Microsoft and SAP. So, I mean, this really is the market leader by a long shot in CRM. And when you look at the results, I mean, revenue of $4.87 billion, that was up 30% from a year ago. $1.86 billion in operating cash flow, that was down slightly, but that was due to costs associated with the pandemic. In regard to the guidance, yes, they pulled back a little bit on the guidance, but I think it's also noteworthy that they're actually sticking to some firm guidance when most companies are pulling guidance altogether.

I think that's a testament to Salesforce's business model. It's a strong subscription model that a lot of companies really depend on. The Tableau acquisition that they made is starting to show its value early on in data management as states and counties and municipalities are looking for ways to track the virus and whatnot. They introduced a new platform called Work.com to help companies manage their way through this period and get back on their feet as the economy starts to reopen. So, yeah, I mean, I would certainly look at the market's reaction today, probably something to do with the guidance, but absolutely, this is still just as strong of a business, and I think it emerges from this in even better shape.

Good week for a couple of discount retailers, Dollar Tree and Dollar General, both out with first quarter reports, both stocks on the rise. Shares of Dollar Tree up 20% on strong growth from its family dollar chain. And shares of Dollar General run, hitting an all-time high on Friday after same-store sales grew more than 20%. Yeah, both strong reports. Dollar General, I would say, significantly stronger with same-store sales increases of almost 22% as average transactions were up, as customer traffics were up, both of those things kind of a double whammy to create really strong data. Not surprisingly, home products, strongest category. For dollar general, you saw gross margins up slightly as a result of less markdowns,

which was nice to see. As with everyone, COVID-related costs were significant, but the higher sales actually were able to absorb those. And you saw an increase in earnings for dollar general of 73%, a really strong quarter. Dollar Tree, also strong, but not as much. Family Dollar division of Dollar Tree really getting it done with 15% comps, where Dollar Tree, the namesake store, comps were actually down a bit because they're more focused on non-staple categories like candy and decorations, and the Easter holiday actually hurt them. As a result, gross margins were down a bit, and of course, they had covered related expenses as well. In general, both of these value-based companies, value-based stores, putting up good numbers. On last week's show,

we talked about Walmart and Target. They're putting up same-store sales growth of around 10%, 11%. We're seeing the numbers here with the family dollar chain, with Dollar General. A year from now, if we are much closer to normal, do you think this is going to come back to bite those retailers, or will Wall Street analysts actually adjust their expectations accordingly? I mean, we'll have to, because comps can't hold up. Dollar General said comps in May are still at 22%, so that's great for May, but as you said, you know, going out a year from now. Well, you'll constantly hear us say, and analysts on Wall Street say, but they were up against

tough comparisons. That will be the buzzword of the retail kind of season a year from now, because these kinds even though there will be a retail shakeout and they will be the beneficiary of that, these numbers are not sustainable. Coming up, one iconic brand files for bankruptcy. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Ron Gross. Ulta Beauty's first quarter profits and revenue came in much lower than expected. Jason Moser, that can't be be a surprise, can it? I mean, Ulta Beauty, I know they've got the product side of the business,

but they run salons. Yeah, that's very well put. It's not a surprise. Sales fell almost 30%. Frankly, it could have been a lot worse if you consider how this business really makes its hay. It's clearly a company you would figure would be hit harder than most during this with all of the store closures. They have just over 1,200 stores. And as you mentioned, that includes salon services. And when you include the salon services and the hair care products and services that come from that. It represents about 25% of overall revenue. So, it does matter. Now, they are able to counter that a little bit with online sales. They have an online business today that represents about 20% of total sales, and that continues to improve. This is going to accelerate the

omnichannel investments from a fulfillment center that they're putting up in Jacksonville to more ship-from-store capability. So, it will be rough for a little while, but everyone in the same boat here. When you look at the market they pursue, that makeup and cosmetics market, it really is a large market opportunity. It's pretty darn durable. They really are one of the leaders out there. I have always really been interested in this company. I run our AR and Beyond service. I'm always looking at these augmented reality, virtual reality companies, whatnot. Ulta fits that bill. They made a little acquisition a while back and they have this app now. It's called Glam Lab. And I'd be interested to know if Mac has ever used it.

But ultimately, it's an interactive app. It utilizes augmented reality, allows people to try on Ulta products and see what they might look like before they actually have to make that purchase. Since the crisis began, guest engagement with this tool has essentially gone up by a factor of five. And more than 30 million shades, and I would imagine that's shades of lipstick and eyeshadow and everything in between, 30 million shades have been tested virtually. So, this really is, I mean, a very forward-looking company. I think there are a lot of things they're doing well here. And as they're able to open those stores back up, I think they're going to be in a pretty good position. Shares of Williams-Sonoma up 25% this week after a strong

first quarter report. And Ron, for years, we've been talking about the omni-channel approach that Williams-Sonoma has taken, and it really paid off this quarter. It was essential because Williams-Sonoma, you know, deemed non-essential, obviously. Pottery Barn, West Elm, non-essential. So they remained closed. 616 stores closed for more than half the quarter. But even with that, 2.6% comp growth, thanks to their multi-channel platform, as you said, and by that we mean largely e-commerce, up 30%. Overall, total sales were flat, but this is a pretty strong quarter for a company that had to close every store. Impacted by higher shipping costs to get that e-commerce merchandise out to consumers, but a really

nice quarter. Curbside pickup now available at 475 locations, we're getting back. Hertz Global has filed for Chapter 11 bankruptcy protection. Jason, this story was rumored, then reported. It became official this week. The New York Stock Exchange is going to delist the stock. We'll get to Hertz in a moment. I should mention, though, the most surprising part for me is the fact that shares of Avis Budget up 40% this week. Is that automatically going to be a win that extends itself to Avis Budget? I don't know that I'd go so far as to say this is the obvious trade here. I mean, it's a tough market they pursue anyway. But in regard to Hertz, I mean, this really was just kind of the icing on the cake. It's been

a very challenged business for a long time. Sales are flat. They've been taking losses left and right. They've been plagued by management upheaval. I mean, they named its fourth CEO in six years just in May. When you don't have a leader there for any stretch and they can't have any consistent vision or try to see around those corners and evolve and adapt, I mean, it just really puts the business in a tough spot. The line item to me that really stands out is on the income statement. That's the net interest expense. It went all the way from 6.5% of revenue in 2015 to 8% of revenue today. 2016 was the last year they were free cash flow positive. Debt to equity is close to 14. The cost of doing business for these guys is sky high

anyway, gross margins of 15%. It's a very difficult business. And they can whittle it down and try to streamline. But yeah, the Avis pop, I wouldn't read too much into that. I think the market probably comes back to its senses at some point, because Avis is just as challenging, really, when you look at it. And Hertz has more than half a million vehicles. Isn't it possible that if it emerges from bankruptcy, some of those vehicles get sold off? It seems like, among other things, this is a really bad point in time to be in the business of selling brand-new cars. Yeah, I think that's a reasonable assumption. I mean, if they're going to streamline their cost structure, part of that's going to have to come from whittling down that fleet.

And those cars aren't just going to go to the junkyard. So, we could be in a period of time where the used car market starts looking really attractive and consumers have a lot of choice. That would certainly reflect poorly with the new car market, and they don't have a lot of levers they can pull there, and they're already at 0% financing as it is. Yeah, no money to be made on the financing side. We're driving less, so servicing revenue is going to be less. So the car industry is taking it on the chin for sure. All right, Jason Moser, Ron Gross, guys, we'll see you a little bit later in the show. Up next, we will get an update on the reopening of Disney Parks with our man in Florida, Rick Munarez.

is. Stay right here, you're listening to Motley Fool Money. Chris Hill. Welcome back to Motley Fool Money. I'm Chris Hill. Rick Munarriz analyzes the entertainment industry for The Motley Fool. Earlier this week, producer Mac Greer caught up with Rick to talk about AT&T's launch of HBO Max, as well as the video streaming battle between Netflix, Roku, and Amazon. But the opening topic was an emerging plan to reopen Disney World in July. There aren't a lot of details known at this point, but with a phased reopening of magic kingdom and animal kingdom scheduled for july 11th and hollywood studios and epcot targeted to open on july 15th mac wanted to know what rick thought of the plan so far

the good thing about disney is that they've gone through this before i mean shanghai disneyland when it opened in early march it was done with a system where you needed to have an advanced ticket purchase or advanced reservation uh the capacity of the park was limited to less than 30 percent of the actual capacity uh and it worked pretty smoothly the first day all tickets sold out and then eventually after that uh it's been pretty steady you know capacity so i think disney has a handle on this when they opened disney's galaxy's edge over at disneyland for the first three weeks they also had a reservation system to get into galaxy's edge so they had they probably had the technology down pretty fairly pat i i'm not worried about the technology of aspect of it

uh it's going to be inconvenient especially if you're playing well i'm going to be there i'm to be in Orlando for a week and you have to get seven different days of availability on this platform. But it is what it is. And I think it's just one way to cap capacity. It may never even have to come to that, but I think it's necessary to make sure that they don't have a lot of disappointed people driving out there to be turned away. Okay, Rick, but when you look at the competition, if we define it a little more broadly, you've got Legoland Florida opening June 1st. You've got Universal in Orlando opening June 5th. You've got SeaWorld Orlando opening June 11th. Why is Disney opening basically a month after the competition?

Yeah, I mean, that was the real puzzling thing about it. I think when Universal announced first, Legoland also, when they first announced, okay, well, Disney and SeaWorld will just announce sometime in early to mid-June. I think Disney knows that they have an advantage of being able to wait. Obviously, this isn't a company that lives and dies by their theme parks. They have a lot of media properties, a lot of other content, other things they can do. They can hold back on that. And I think they would rather just watch and see.

I don't think the parks need that extra month to get ready because everybody's been preparing for the new normal since pretty much mid-March. Disney was the first one to close, announced that it would be closing its parks. But I think by waiting, it can see what others are doing. It can see what worked, what didn't work. And I guess more importantly, for just the sake of watching the coronavirus, if there's a spike in cases in Florida, a dramatic spike between June and July, and a governor says, hey, you know, we got to close the parks again.

Disney didn't have to close their parks a second time like everybody else will. There is that advantage. Also, the fact that once Disney opens, there's going to be a massive flux of people coming in. Universal Orlando, SeaWorld, Legoland, they're all great, but they're not these big tourist draws like Disney is, obviously. I think saving Disney for the end, the last course, does make sense to me, just on many different levels. What's your biggest concern as someone who obviously follows the company as an investor, but also as someone who's going to the parks, has gone to the parks. What's your biggest concern? Yeah, I mean, I have several concerns as an investor, but as a park goer, and I can take off my investing ears and put on my mouse

ears and approach this, my concern is what the experience will be like, because a lot of things that we know and that we probably remember Disney World and even Disneyland to be about, they're not going to be happening anytime soon. So all the parades, the fireworks, you know, just basically, you know, lining up and getting a hug from Mickey Mouse, you know, these character meet and greets all those things aren't going to happen anytime soon disney has said as such obviously the mask is this very you know hot button issue you know uh you know do i wear a mask do i not and it's required uh it's required it's required at universal orlando required at seaworld orlando not required at legoland florida and not required a lot of

smaller parks it's an interesting distinction but there are people of course that do not i don't think anyone wants to wear a mask but i think in general there are people that will not go to a disney park definitely in july where it's really hot and rainy and humid uh and put on a mask all day especially for a child and anyone older than three three and older will have to wear a mask at disney world uh is their policy as of right now so i think the concerns are the experience that you're going to be a part of i mean you could take off your mask in if you're dining at a restaurant or eating and sitting down and eating or drinking something they disney says that they are considering relaxation areas like little areas back when they before they banned

smoking in the parks they used to have these smoking sections in the park that's what i think will happen that okay you really want to take off your mask go to this section where everyone else is assuming the same risk just take off your mask but they will not let you into lines with people uh social distancing within the parks means the lines are also being redrawn where everyone has to stay six feet apart we've seen it work at shanghai so this isn't something that's going to be a new ground for disney in general but it is something that's going to be a new mentality for a lot of people usually coming to these crowded Disney parks, where already there's a lot of things that are going to make the experience less than ideal. Okay, Rick, and let's talk about the

stock. You mentioned that you had some concerns about the stock. Now, Disney down around 20% for the year, which seems like a lot, but it's actually up big in the last few months because it really, really took a hit. And if you look at the five-year chart, Rick, it's trading essentially in the neighborhood where it was five years ago. So, what do you think about the stock? Yeah, I mean, Disney had all-time highs just above $150 back around right before Thanksgiving, a couple of days before the Thanksgiving holiday. And even though it's trading well below that, yeah, it did bounce back dramatically from that March bottom. And I think most stocks did. But Disney is the kind of company where you can definitely say that its theme park business

isn't going to just spring back to life. I mean, there are international travel restrictions right now. Right now, even if you're coming from certain states in the Northeast, you have to self-quarantine for 14 days. So there's less of an incentive to even come down to Florida. The hotels and rental market, these are things that are slowly starting to open up. So this isn't going to be a market that will, right away, you'll get to the 20-plus million people that come to the Magic Kingdom every year. That's not happening next year, even. I think this is going to be a drawn-out process. And obviously, it's not just theme parks. And theme parks are very important to Disney. The theme park segment, which includes the resorts, the cruises, the other experiences,

This is 38% of its revenue last year and 45% of its segment operating income. So it's a very important component of Disney, and that's not going to bounce back anytime soon. Obviously, Disney's studio arm, there are no movie theaters right now open, at least not a major number of movie theaters open. So they're not going to release movies until later this summer, and even then, those may get pushed out. So there's a lot of aspects of the Disney model that concern me. I am a Disney investor. I'm a Disney fan. It follows that I would own Disney. I'm very hopeful and optimistic that Disney will be back to normal in a couple of years, but I think it's going to be a very hard 2020 for Disney. And I'm just surprised the stock

bounced up so quickly when there's still so many question marks. One of the real silver linings for Disney, the company, has been just the massive growth of Disney Plus, their streaming service. Just incredible, incredible growth. How much of a needle mover is Disney Plus, you think, for the stock? Because it seems like right now that's the dominant narrative on wall street yeah disney plus is the one platform you know is growing during the pandemic but it's not going to be enough to offset what's happening now at the theme parks at the disney retail stores at the movie theater even at the at the studio arm all these things disney plus is not that strong you're thinking well 50 million people that's got to be

strong and there's new i mean it's gonna hasn't even launched in japan yet so we still have a lot of areas for Disney Plus to grow. It is an overnight sensation. Clearly, it was launched just six months ago, and it is a force. So, Disney Plus is very exciting. But this is a company that still, 250 million people paying, let's say, $6.99 a month or less for the service, isn't going to move the needle as far as what we're losing because of that. Because people that are moving to Disney Plus are probably maybe also considering cutting the cord with their cable and satellite television providers. So that's money that they'll lose from Disney Channel and ESPN subscriptions. So they do have a lot. There is something to lose with the Disney Plus game.

I'm very excited for Disney Plus. I think Disney is really flooring it here on that platform. But I definitely think it's not just, you know, there are a lot of negatives to the positive of Disney Plus. Okay. Let's turn our attention to a potential competitor to Disney Plus, and that would be HBO Max. Now, AT&T owns HBO. So, unveiling HBO Max, the streaming service this week, HBO Max will stream blockbuster movies like Harry Potter, as well as popular TV shows, Friends, The Big Bang Theory, and Rick, of course, they've got that HBO catalog, Game of Thrones, The Wire, Sopranos. What do you make of HBO Max? Yeah. I mean, I like HBO Max, and generally, I like its prospects. But to me, HBO Max is just

what HBO Now was with maybe on steroids. And so I don't think it's going to be like this game changer that's going to be, you know, an immediate lift to AT&T and HBO Max for that reason. But clearly it's good to be differentiated. There are some hiccups with the process that it's not as at launch, it wasn't available on Roku or Amazon Fire TV platforms, which are very popular ways that people are consuming streaming media. But I think, yeah, content matters. And the reason Disney Plus became an overnight sensation was because not only was it The Mandalorian, it's that people knew, this is where I can get all my Disney content. This is where I can get all my Pixar, my Marvel, my Star Wars. That was all there. So, HBO comes from a very big source.

Obviously, Game of Thrones, I mean, there are no more Game of Thrones seasons, but there is this back catalog of iconic HBO shows that are available on other services somewhat, but I can picture HBO Max starting to pull those in so that it will be the one place where you go stream a lot of these shows. And Rick, HBO Max, around $15 a month. How do you weigh that value proposition relative to what you'd be paying for Netflix or Disney Plus or Amazon? Yeah, clearly HBO Max is priced at the high end because they have to. They have to defend their legacy business. There's still a lot of people with their cable and their satellite television providers paying $14.99 a month for Netflix. I mean, I'm sorry, for HBO. So if you

get to the point where if they were going to price it, let's say, at $9.99 or $11.99, they actually had a pre-launched $11.99 promo they ran just before the launch. But you couldn't sustain that and be cheaper than what people were paying directly through their cable and satellite television providers. I think that they're stuck by that. Disney didn't have any qualm coming in at $6.99. Apple TV didn't have any reason to not go at $4.99. But HBO Max was sort of anchored into that $14.99 or higher spot, they could not have gone lower. And that could be an issue because especially if we're heading into a recession, people will be cutting costs. And paying Disney Plus $6.99 a month may seem more reasonable than paying $14.99 a month for HBO Max.

Okay, Rick. So, as we wrap up here, looking out over the next five years, when you look at the stocks and the major players involved in streaming, how about give me a win, place, and show, a first second and third and give me a dark horse all right so um for win i mean i'm going to go with with roku as the winner only because it is the one agnostic platform that has 39.8 million people up 37 over the past year a lot of people are streaming through roku and because it doesn't play these games obviously it's entangled right now with with at&t and hbo max right now to see whether or not it carries it but um roku usually has all the apps basically have thousands of available options. And people are streaming an average of 3.6 hours a day, Roku users,

3.6 hours a day, which is a lot of time on the platform. It is sticky. It is engaging. And with the advertising market all in flux, a lot of companies want to get noticed. A lot of services want to get noticed. And they're paying Roku, so they're getting prime position on that hub. So I think Roku will be a clear winner. For second place, I'm going to give it Netflix, and I'm sure some may argue that Netflix is No. 1 as far as a peer service, but you can't argue with its scale. This is a company that has 183 million people paying subscribers worldwide. As of the end of March, it expects to have more than 190 million at the end of June. Not only that, the fact that it has this many people gives it so many

advantages that people will pay. It's able to divide the contents of it acquires over everybody over such a large number of paying customers. They can spend $10, $15, $20 billion a year on content and still be fine. Other companies can't do that. That's why people flock to Netflix as a viewer and why if you make a studio, if you have a TV show, if you have a movie, you want Netflix to distribute it because you want to be the next Tiger King. You want to have the next platform that people watch everywhere internationally. I think that's going to make it definitely a strong number two and probably number one overall. If I was going to rank it potential of the stock, I'd say Netflix number two. For number three, I'm going to give you a

dark horse, which isn't a dark horse at all, but it's a name that people don't really talk about. And I'll say Amazon, because while Amazon itself, they have the Fire Stick platform, and they do have Prime Video, and video is not the same kind of player as, let's say, a Netflix or Disney, which owns Hulu, Disney Plus, and ESPN Plus right now. I think Amazon's a very interesting company because we are starting to move away from the way we view viewing services. And I think just as we saw when Trolls World Tour came out right at the start of the pandemic, and Universal said, Comcast said, okay, we are not going to get this movie into theaters. We have lucrative toy deals, licensing deals that have to happen now. They went directly to consumers,

asked them to pay $20 for a 48-hour rental, and they wound up making $80, $90 million in the first few weeks of that. So there is a market for this, and Amazon is well-positioned for this. Netflix does not sell these piecemeal rentals and digital purchases. Amazon does. And a lot of people are comfortable with the Amazon platform. There are obviously hundreds of thousands of Amazon Prime customers, hundreds of millions, sorry, of Amazon Prime customers around the world. And I think it's going to be a very successful way for them to get in and grow their presence by just selling digital rentals and digital sales, which is a market that's just starting to grow right now. And I see that they're a leader in that. So that would be my third place.

my win-play show would be Roku, Netflix, and Amazon. Coming up, we'll dip into the Fool mailbag and give you an inside look at the stocks on our radar. 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 with Jason Moser and Ron Gross. Our e-mail address is radioatfool.com. From Zach Torno who writes, thanks for all you do. I love listening to the show. I'm a young investor who's managed to build a

diverse portfolio. However, I don't have a lot of dry powder to spend on new opportunities. recent news that Teladoc might lose some momentum after COVID. I'm wondering if it might be smart to sell some of my Teladoc position, which I have thanks to Jason Moser, to buy some stocks that seem poised for a V-shaped recovery. I still believe in Teladoc's future, but I would hate to miss out on opportunities. Jason, what do you think? Jason Moser. Yeah, that's a good question. I do believe in Teladoc as well. I don't know if this is going to be a V-shaped recovery or an ampersand-shaped recovery, to be honest with you. Understand you're trying to predict a little little bit of the future there. But I would just say this, if your Teladoc position is causing you

to lose sleep at night, that can always be a sign that maybe you should pare back that position. I would rather sell losers and reinvest that money into better ideas personally. The one thing I do is I look for first, is I look for the underperformers, the companies that just haven't really worked out. I think you get more out of pulling those weeds and watering those flowers. But I do think that Teladoc has a very bright future. We'll be volatile along the way, but that's my two cents. Let's get to the stocks on our radar. Our man, Dan Boyd, is going to hit you with a question. Ron Gross, you're up first. What are you looking at? Dan, let's go with Intercontinental Exchange, ticker ICE, operator of securities exchanges

and clearinghouses, including the New York Stock Exchange, a clear leader in the space, very strong competitive position. They make selected acquisitions to keep things growing. Stock is actually up a bit this year, been very resilient, got hit a little bit, but rebounded really nicely. They've increased their dividend for the past seven years. It's only a 1.3% yield, but you're constantly getting that increase, which is nice to see, plus a strong stock so far this year. Dan, question about Intercontinental Exchange? Not so much of a question. Ron, this is the most impenetrable stock that you've brought to Radar Stocks in a long time.

What do you have to say about that? Impenetrable, meaning that it has a strong competitive position and can't really be taken down by many folks out there? Is that what you mean by impenetrable? Sure, you could say that. I mean, that's one of the reasons I like it. It has just a very strong competitive advantage. and it's going to be hard for people to take much market share away from them. There are competitors out there, but they've been around for a long time

and will remain very strong into the future. Jason Moser, what are you looking at? Well, Dan, compared to Ron's pick, this is a bit of a spicier meatball, but it's Bill.com, ticker is B-I-L-L. Recent IPO at the end of 2019, but they cater to small and medium-sized businesses and sell software as a service to help them manage their accounts payable and accounts receivable. ultimately trying to whittle down that paper check and really just get into the world of

electronic transactions. Just recorded 91,000 customers, over 28% growth in the last quarter, processed 6 million payment transactions, which was 23% growth. They do have a forming competitive advantage in a network effect. And the founder and CEO, Rene Lassert, owns about 4.5% of the business. So, still a young company, still very volatile, not profitable, but very interesting, particularly if you buy in to my war on cash philosophy. Dan, question about Bill.com? Is Bill.com going up against Shopify? No, not necessarily. Bill.com is helping manage more back office operations, where Shopify is helping companies set up their own operations. Shopify does have a payments aspect with Stripe, but they're two different

things. What do you want to do, Dan? I'm going to pull a fast one here, Chris. I'm not going to choose either one of these stocks i'm choosing restaurant brands international to add to my watch list because i'm going to popeyes i'm going to popeyes after the show respect all right jason moser ron gross guys thanks for being here thank you chris that's going to do it for this week's show our engineer is dan boyd our producer is mac career i'm chris cell thanks for listening we'll see you next week We'll be right back.