Motley Fool Hidden Gems Investing - New Highs for Alphabet, Amazon & Microsoft

Episode Date: October 23, 2015

Alphabet, Amazon, McDonald's and Microsoft hit new highs. Valeant Pharmaceuticals plummets. And Oprah gives Weight Watchers a boost. Our analysts discuss those stories and share three stocks on their radar. Plus, CNBC's Kayla Tausche talks big banks, Square IPO, and Star Wars. Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's the Motley Fool Money Radio Show. I'm Chris Hill. Joining me in studio this week from Motley Fool Rule Breakers and Million Dollar Portfolio, Simon Erickson. And from Million Dollar Portfolio, Jason Moser and Matt Argersinger. Good to see you as always, gentlemen. We have got some blowout earnings from Wall Street. Kayla Tausche from CNBC is our guest. And as always, we'll give you an inside look at the stocks on our radar. We began last week's show with Walmart. This week, we begin with the only retailer that is bigger, and that's Amazon. The company reported a third-quarter profit

when Wall Street was expecting a loss, and the stock hitting an all-time high on Friday. Jason, this wasn't one of those beat-by-a-penny kind of profit quarters. This was just destroy-expectations quarters. No, there wasn't really any question. I'm glad you let off with Walmart, though. It's funny, just at the end of July, we were making a big deal about how Amazon had surpassed Walmart in market cap. I mean, Amazon is now a clean $100 billion bigger after this. That's remarkable. Yeah. I mean, it's just like in the blink of an eye. I think the headlines we're talking

about are Amazon Web Services. To be sure, I think that's the big story with Amazon today. They lifted a hood a few quarters ago to give us a better idea of how big it is, how big it will get, how profitable it is. It was responsible for more than half of the total segment operating income this quarter. The thought that one day Amazon Web Services could actually surpass Amazon's core retail operations is pretty amazing to think about. I think the market certainly is looking at that as a possibility. It's at a run rate today of about $7.5 billion in revenue, and very profitable operating margin of the 25% range. The one thing I want to call out here, though, I think it kind of slips under the radar,

is Amazon does a very good job with its third-party selling platform, where they're kind of helping other people sell things. And so, we saw a big reduction in operating expenses this quarter versus last quarter. It was four to five percentage points lower. And a lot of that was due to this growth in the third-party sellers, which continues to whittle away at that expense side and really helps boost the profitability of their retail operations. I think when you have that to look forward to, along with this Amazon Web Services behemoth that just continues to bring results, there are a lot of reasons to be optimistic about this company. I think the market is expressing that.

Yeah. Even Prime Day, which we joked about when it happened this past summer, That added 2% points to Amazon's revenue growth. That is something they can just turn on the dime and say, hey, we're going to do another Prime Day, we're going to do another big special. You said it, Jason, I just think it's remarkable. From a profitability standpoint, there's no doubt that AWS is already beating the overall e-commerce business, but at the growth rate it's going, I definitely think AWS is probably going to be bigger in several years. Prime is such an important part, too. Amazon has done such a great job of bringing value to those customers, and they stick around, and the retention rates of that are very high,

and that's really good for the business economics, too. Absolutely. Alphabet, the parent company of Google, hitting an all-time high this week after third-quarter profits came in higher than expected. And Simon, some people were wondering how the new corporate structure was going to work out, and it looks like it's working fine. It is doing pretty well. If we did a Google search of Alphabet's results here, we'd come up with prioritization, I think, as the top entry on this one. And Ruth Porat comes in, CFO now of Alphabet, and she's basically prioritized every project

at Google, saying, hey, we might have $73 billion on the balance sheet, but we're not just going to bring out the credit card for anything out here. Every project has a line item and an expected profitability and future revenue impact that's associated with that. And she's just basically going down the list and saying, hey, we're not averse to big acquisitions. We're still going to be Google, now Alphabet, but we're going to be looking at those with a lot more scrutiny, and investors love to see that. Also announced a first stock buyback plan. The $5 billion mark, I don't know,

I looked at that and I thought, gosh, for all the money Google has, you could buy back more stock than that. And Chris, it's even better than that, it's actually $5.099 billion. They've gone to three decimals on this one. Again, they think their stock's undervalued, let's put some money behind it and put a repurchase plan in place. Shares of Microsoft up more than 10% on Friday after first quarter profits. Once again, I'm sensing a refrain here from the big tech companies. Profits higher than expected. Much higher, Matty. And the new Windows 10 operating system running on 110 million devices. This is a blowout quarter for Microsoft.

It was. And when's the last time you could say Microsoft was up 10% on an earnings move? And, by the way, all-time high, surpassing the high, finally, that they had 15 years ago in early 2000. So, it's been a nice ride. I mean, well, it's been a bumpy ride for Microsoft, they're kind of breaking out to new highs now. The thing here is that the company is in a big transition mode, transitioning to cloud, subscription-based plans for their software. And those are all happening. It's nice. The problem is, that transition, the overall growth of the company is going to suffer a little bit as they make this transition. But yeah, they beat earnings, they beat revenue expectations. The growth for Office 365, which

is the cloud-based version of Office, up 70% in the quarter. They mentioned that Azure, which is, of course, their AWS cloud computing solution, more than doubled revenue there. They didn't really break it out at that minute level. What I wonder is, with Microsoft, you can't expect a lot of growth from Microsoft, but I think what you can expect as a shareholder is a lot of buybacks and a growing dividend. They've got $60 billion in net cash. I think I would expect them to probably accelerate the buyback, which they've actually been doing, and raise the dividends.

So, you know, you have a really solid competitively positioned business here. Maybe it gets you mid to high single digits growth, but maybe with the buybacks and the dividend, you can get actually a pretty decent return from Microsoft. Although, if you go back, and it's February of 2014, when Southey Nadella becomes the CEO, stock is up almost 50% in that time. I think people were optimistic about Nadella. I don't think they were stock up nearly 50% in less than two years optimistic. No, he's earned whatever paychecks have come his way over the last year and a half.

So, you know, the theme of profits much higher than expected, I think, goes along nicely with the other theme here with these three companies, which is just how they are all winning big on the investments they've made in the cloud. And I'm wondering if all other businesses that are trying to make a go of it in cloud computing should just pull up stakes and leave town. It's a good question. Pull up stakes, I don't know about that. But I do think what we will see, and what we are seeing now, and will continue to see, is at least the recognition of these big players

in the space. We were talking about this earlier today with Rackspace. Really, we were wondering if there was a future for this company because of everything that Amazon had been doing. They are forming an alliance with Amazon, really, to Rackspace's benefit. You could say that Rackspace needs Amazon more than Amazon needs Rackspace. But it opens Amazon up to a little bit of a different clientele, and it certainly gives Rackspace a bit more of a reason to be, so to speak. I think you'll see probably some more alliances formed here out of this. Just to add to that, it's really hard to be more efficient than Amazon or Microsoft

or a really, really big company in the cloud. I'll say one more thing, too, Chris. There is a risk out there, and I think it favors the big players like Microsoft and Amazon and Google. If you look at Europe, the European Union, to run cloud-based businesses in Europe, you actually have to have the existing hardware architecture in each country. You can't do e-commerce in Germany unless your server farm is injured. That obviously favors companies like Amazon, who have the scale, but it's definitely going to hurt smaller players like Rackspace, no doubt. Here's a company that really doesn't fit with the previous three, except in one

regard. McDonald's, stock up more than 7% this week after third quarter profit and revenue, both coming in better than expected. Really good same-store sales in the U.S. for the first time in a couple of years, Jason. And this doesn't include the breakfast all day. We talk a lot about businesses that are victims of their own success, so to speak. In this case, I think that McDonald's is probably the beneficiary of its own shortcomings. This has been a business that, for the past couple of years, has not really performed very well at all. They've been faced with a lot of headwinds, and it's changing fast casual space, so to speak. We saw Don Thompson step out there of the CEO role, and Steve

Easterbrook step in, and we were all very curious as to how exactly he was going to approach this. They want to try to become a modern, progressive burger company, whatever that is. But the bottom line is, when you bring numbers that are positive comp sales across every segment, I think that's obviously a sign that something has changed. I think it helps that they reorganize the business. Instead of focused on geography, they're focusing more on markets that are similar, so they can compare apples to apples, so to speak. But again, this doesn't reflect the change to offer breakfast all day. We've seen two sides to the coin there. It seems that franchisees are at least expressing some concerns in supply

chain management and throughput, so to speak. But we'll see, I think, next quarter, the beginnings of whether that's going to help bring results for the company. But bottom Steve Easterbrook's got to be feeling really good about what's going on here, and I think they've got things going at least in the right direction. Yeah, the stock up about 25% since Easterbrook took over as CEO less than a year ago. Simon, are you interested in McDonald's hitting an all-time high? I think supply chain management. I think J-Mo hit it right there. I mean, you've got McRib coming back, you've got breakfast all day. These things are great, and maybe

somebody's excited about it. I know I'm not that excited about it. No, I'm not. But you'll say, are they really great? The one thing I have to say, I love the marketing approach, the commercial approach to the breakfast all day, where it shows people who have submitted tweets or messages on Facebook to McDonald's saying, why can't you offer breakfast? I showed up late, I missed breakfast. Why? Exactly. I think that's been great. I love the commercials. It probably wouldn't encourage me to personally go to McDonald's, but I love the commercials.

I'll tell you, personally, this is just a headache waiting to happen for these guys. In-N-Out has got, what, four items on the menu right now, and they've got lines out the door of people waiting to get that. I think efficiency and simplicity is key for this. And I think you got something there. I mean, we talk about Chipotle, businesses like that that focus more on simplicity. We can look at Pizza Hut. We know Yum! Brands has been having some trouble with Pizza Hut and KFC. Pizza Hut decided to try to offer consumers more choice. And you need a degree in rocket science to get through that menu at this point. And it's not working out so well for them right now. So that's going to

definitely be something to pay attention to. Google, Amazon, Microsoft, McDonald's, They all had a pretty good week, but they didn't come close to the week that one consumer stock had. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Matt Argesinger, and Simon Erickson. Rough week for Stratasys. The 3D printing company issued preliminary third quarter results that were well below previous estimates. This is the second quarter in a row they've done this, Matt.

It's been tough going for Stratasys and really any of the pure-play 3D printers. They're guiding for revenue now between $166 million and $168 million. They're going to report in a couple of weeks. That's down 18% year-over-year. But here's the worst of it. They're guiding for a net loss of as much as $190 million, and that's related to their MakerBot acquisition, which they're going to write down about $180 million worth in the quarter. Essentially, if you look at the write-downs they already have and the write-downs they're actually predicting they might have to make in the future, that business is essentially worthless today. And they paid a king's ransom for it, which is shocking.

Was that the thinking going in? I remember the MakerBot acquisition. I don't remember the sentiment particularly going one way or another. Was there anyone out there saying, you know what, this could go bad real fast? Well, you've got to remember, this was in the hype of the 2013 3D printing craze. And I think what Stratus has looked at is, we have a great commercial industrial business, but 3D Systems has got these Q printers, the consumer angle. We don't have a consumer really a big, solid consumer business, let's go buy MakerBot. And that's just turned out to be a disaster, because the consumer part of the 3D printing market has been a disaster.

And contrast that with Protolabs, which we can talk about, Simon. There, you had revenue up 24%. Customers were up 24%. This is a company that attacks the service side of the business, and there's no claim about macro problems or 3D printing demand, which Strasher's is making. So, it's interesting to contrast those two. It is. It's hard to extrapolate the early adopters to the mass market. It seems like when we were talking in 2013, a lot of expectations baked in of, there's going to be a 3D printer in everybody's home for the next five years and stuff like that. They were seeing great results from commercial customers. That was doing great, and the industrial side of the

business was fine, but there was just a lot too much optimism, which is why they were acquiring companies which lit a lot of money on fire. You think about just not too terribly long ago, Jeff Bezos had a part in MakerBot when and they sold that to Stratasys. They had a number of people asking at the Amazon annual meeting last year, what about 3D printing? What are the implications there? What's the future? Listen, it's neat technology, but it's not for the masses. There's no point in going out there and trying to print a toaster, because there's so many things involved with trying to print a toaster, you might as well just go buy it. It's going to be more cost-effective.

That was the example he used, a toaster. You see that hype really led up to just unreal and unsustainable prices. You look at the year-to-date charts for Stratasys in 3D systems, it's like that Price is Right cliffhanger guy. It's like he got to the top of the mountain and just kept on going. He just fell straight down. And I'll just point out that these companies are still worth in excess of $1 billion each. Given the demand picture and the revenue growth, I feel like there might be more downside to come. We'll have to see. Chipotle's third quarter revenue rose 12%, but same-store sales came in just north

of 2.5%. That'd be good if McDonald's put up 2.5% comps, but not so good for Chipotle. I'm not concerned about it, Chris. Remember last year, comps were 19.8%. Brief pause while we digest that. I mean, 20% comps for a restaurant is insane. Tough to lap that. But so much of that was baked into price increases, as we saw skyrocketing costs, not only of dairy and of beef, but also avocados. Remember the shortage we had last year? Chipotle did not have those this year. They're still getting good traffic through their stores, the number of transactions was increasing. But I'm not too worried about the mid- to low-single-digit

comps on this year. Shares of Valiant Pharmaceuticals down around 30% this week after Citron Research issued a short report alleging fraud, including the phrase, Enron Pharmaceuticals. That's bad. That is bad. I haven't read the report, but I just know anytime you're attaching Enron to something, that's bad for your brand. The report was damning. We have to remember, this is Andrew Left, this is Citron, The Motley Fool. We've had some engagements with Citron. O' This is their move!

This is it. This is what they do. They, for the most part, take a short position. They put out a seemingly sophisticated report that captures a lot of investor attention. It's distributed everywhere, and stocks get crushed. Usually, we call it stocks getting Citron-ed here at The Motley Fool. The problem with Valiant is, there's an issue here with with the pharmacies that they either control or own, and the idea of selling drugs to these pharmacies and booking that as sales, even though these are intercompany transactions and the revenue shouldn't be booked until the drug reaches the patient. That's really the heart of the claim that Citron is making. I would also point out, though, that Valiant

is a business that, when it comes to public perception, they might have a bit of an issue. This is a company that spends very little on R&D. They spend less than 3% of their revenue on drug development. If you look at most biotechs or drug makers, they're spending anywhere from 15% to 30% of their revenue on R&D. They spend about 3%. They do most of their development by acquiring other drugs, acquiring drugs that are already out in the market, and jacking up the prices. Here are a few examples that stand out. They bought a heart drug called Isoprel. I'm probably saying it wrong. The list price for that was $4,000 in December 2013 when Valiant bought them. It's now $36,000. They bought a diabetes drug called Glumetza.

The prices for that were $900. Today, after Valiant bought them, $10,000. And there's another one called Supermine, which is a treatment for Wilson disease, which I assume is a rare disease. That went from $800 to more than $26,000 after Valiant bought them. So if you're looking for a company that's probably going to have some scrutiny, regardless and already has, they've been subpoenaed by the government and the FDA, it's this company. And now you layer on this Citron report, and wow, you're talking about a company that's lost about 60% of its value over the last year? Yep. I think that, what Matty is exactly right, the perception issue here, but I think

also as investors, you just can't overvalue the importance of knowing what you don't know. And I think there are a lot of things that we just don't know, a lot of things that a lot of people don't know in regard to this company. And Citron, you can say what you will, but when there's smoke, there's usually fire. And I think with Valiant, there's going to be some issues that we don't know about yet. As I mentioned earlier in the show, some stocks made impressive gains, but they all pale in comparison this week to the No. 1 gainer on the New York Stock Exchange, and that is Weight

Watchers International, which is soaring on the news that Oprah Winfrey is buying 10% of the company and joining the board of directors. This stock more than doubled in a week. And we've talked before about people like Carl Icahn. News comes out, Carl Icahn takes a stake, the stock pops. Carl Icahn, in his greatest dreams, doesn't accomplish this. I mean, is this turning this company around? So, I'll tell you what woke me up to the power of Oprah, and that was, we lived in Cairo, Egypt from something like 2002 to 2005 and 2006. It just blew my mind, the actual sway that she held with the male population there in Cairo, Egypt. They really, really

hinged on every word she said. She just had a very popular brand, and I thought, wow, on to something. And so, to see the reaction, I'm not surprised at all. She's a market sage now. She is. All right, guys, we'll see you later in the show. Up next, we'll dig into the big banks and get a preview of the upcoming Square IPO with CNBC's Kayla Tausche. Stay right here, this is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. As earnings season kicks into high gear,

the biggest banks on Wall Street have already reported their results. And here to help us make sense of it all is Kayla Tausche. She covers banking, finance, and dealmaking for CNBC. She's also one of the hosts of Squawk Alley. And she joins me now from San Francisco. Thanks for being here, Kayla. Thanks for having me. Is there a headline? I know that for some investors, there's a perception that all the big banks are the same. It's this monolith. I know that's not actually the case, but is there a headline to the latest batch of earnings that you've seen? The headline in my read is, banks really need the Federal Reserve to raise interest rates for two reasons. One, when you think about the traditional lending model, when you can make

a loan at a higher interest rate, then that's more money that you eventually make on your core business. The second reason why it would help the banks is because in their investment banking arms, they have desks that trade fixed income, bonds, currencies, commodities. And without people knowing a clear direction to take in the market, just to sit in wait mode, there's really not that much activity going on on the trading side. And that pretty much dried up for the investment banks. We saw Goldman Sachs, Morgan Stanley hit especially hard because they're so reliant on those types of businesses. But we also saw it hit JP Morgan, Bank of America, Citigroup. So across the board, even a 25 basis point interest rate increase would dramatically help

them and would jumpstart what has been a pretty sluggish business model over the last few years. So do you think that only increases pressure to the extent that anyone can pressure the Federal Reserve to raise rates in December, if not early 2016? Well, it's been nine years already since the last Fed rate hike. So if there hasn't been pressure over that time, I don't see why there would be more pressure now. Certainly, the Fed is an independent body. They don't really care about the bottom line of a certain type of company or a certain sector.

And the banks have been patient. They tell investors, look, a 100 basis point increase would help our bottom line to the tune of $10 billion, $5 billion. They lay out those estimates, but they're just waiting like all of us. And I don't think that there's really anything at this point that could pressure the Fed. In fact, I think that the weakness in the global environment may have given the Fed more pause. That's certainly some of the language that we've gotten in recent weeks from the voting members of the Fed. So we'll see what happens in a couple of weeks when they meet. One of the common themes we hear from a lot of companies across a variety of sectors this earnings season is how the strong U.S. dollar is hurting their results. To what extent are any of the big banks really hurt by the strength of the U.S. dollar? And to what extent are any of them actually helped by it? I think that there is one bank that has an outsized effect from the dollar,

And that's Citigroup. It's the most global bank. They have a huge footprint in Latin America. They're very big in Asia. They've invested a lot over the last decade to become that international brand. The problem is when you see currency headwinds like we've seen, that then hurts them to a greater extent. We haven't really seen any of the banks besides Citigroup mention the dollar as even a really noticeable effect on their business. But Citigroup certainly laid that out there loud and clear. You mentioned Citi. I'm reminded that for a couple of years before he eventually left the company, Vikram Pandit was the CEO there and was really the big bank CEO who was on the hot seat more so than any others. Does anyone hold that

title now? For a while, it seemed like Brian Moynihan at Bank of America was on the hot seat, but in the wake of the most recent vote from shareholders to back him being chairman as well as CEO, maybe he's not on the hot seat. It doesn't seem like he is right now, only because a lot of the legal issues have gotten out of the way. The turnaround at Bank of America and Citigroup, for that matter, both of those banks have been going through a multi-year restructuring, and they've actually been performing pretty well. I think that will help them. You know, they say the best defense to criticism is growth when you're talking about big companies. And that's certainly the case for those two. I think that when you ask CEOs how they feel about the current

regulatory environment, because so many of them have already paid billions upon billions of dollars to the Justice Department, to state attorneys general, to settle some of these claims, they feel like the worst is behind them. Now, of course, a lot of this language is changing As we head into an election year, we're now remembering all the ins and outs of Glass-Steagall. And we've heard several candidates mention being in favor of bringing Glass-Steagall back, which, of course, would espouse a breakup of the banks. But so far, they're building up capital like the regulators want them to. Most of the big lawsuits are out of the way.

And barring some very sharp rhetoric coming out of the candidates for president, And it doesn't really feel like they're the bad guys, at least for the time being. When you're out socially with friends, with family and... Is this what I talk about? No, I was going to say, when people ask you what you do, and you tell them what you do in your day-to-day life at CNBC, do you get a sense that there is any sort of fundamental misunderstanding or misperception that people have about banks? That's a good question. I think that there are certain types of companies that consumers just love to hate in general. Banks, cable companies, airlines, companies that charge them a fee for something that they believe should be free. And banks fall into that category. I don't necessarily feel like there is a groundswell of antagonism from Main Street

When people ask me about the banks and what they're doing I think they, for lack of a better phrase, I think they view them as a necessary evil But certainly, like all of us, they wish that some of the services were a little bit more affordable You're listening to Motley Fool Money, talking with Kayla Tausche One of the hosts of CNBC's Squawk Alley One of the more anticipated IPOs of 2015 is going to take place soon, and that is Square, the mobile payments company. I think you've had a chance to look over their filing. How do they look, keeping in mind that they are about to join their publicly traded peers like

Visa and MasterCard, which are exponentially bigger and better capitalized than they are? Well, certainly some of the financials for Square are incredibly impressive, and it gives you a glimpse into just how many small businesses and artists and merchants all over the world are using this technology. The company has half a billion dollars in revenues, which is no small feat for sure. The problem is they're having to spend a lot of money to bring that revenue in. In the last full year, they had losses of about $170 million. dollars. So yes, they have half a billion dollars in sales, but on the bottom line,

they're not close to profitable and they're on track to lose the same amount of money this year. So they're having to hire people. They're having to invest in their system. They're spending a ton on marketing and product development to compete with the likes of even Amazon, which are trying to get into this space as well. And PayPal, these are massively saturated companies. We're all familiar with them and Square is competing with them on a very large basis. And it's clear looking at the numbers that they're having to spend a lot of money, invest a lot of money to do so. They don't have to spend money on a CEO because they already have one. It's Jack Dorsey, who is also now the CEO of Twitter. Which group of shareholders should feel better about the

amount of time that Jack Dorsey is dedicating to their business? Because it can't be 50-50. And depending on how Square does in its first year as a publicly traded company, at some point, don't you think one of those groups of shareholders is going to start banging on his door saying, help us more? I think that's a real threat. One thing that does help him, although it's a small detail, is the fact that the two companies' headquarters here in San Francisco are pretty much next door. So people have said it's not uncommon to see him walking down the street in the middle of the day where he's going from one job to the next job. The problem is, as talented and as brilliant as Jack Dorsey is, he doesn't

get any more hours in the day than the rest of us. He has 24 hours and the allocation of that time, I think, could be brought into closer focus depending on how these companies do. The other thing is, these are two companies that I would argue both need a full-time, both need full-time attention. You have a young, high-growth company that is burning through a lot of cash, that's about to go public and really needs to reassure investors about its strength and its market share dominance. On the other hand, you have Twitter, who is going through a little bit of an identity crisis, trying to regain its footing. And that type of turnaround takes a lot of focus as well. Proponents of Jack Dorsey compare him to Steve Jobs and Elon Musk, both of whom

have been CEOs of two companies at once. Of course, Steve Jobs, Apple, and Pixar, and then Elon Musk, SolarCity, SpaceX, and Tesla. Of course, he's only head of two of those right now. But so it remains to be seen whether he is a cut above and he's in a class of a very elite few people or whether he is a mere mortal like the rest of us.

Final question, and then I'll let you go. in the business world this week. Earnings season is kicking into high gear. But in pop culture this week, the big story is Walt Disney releasing the final trailer for the upcoming Star Wars film, The Force Awakens. People are already buying tickets, even though the film doesn't even get to theaters for another two months. And yet, Kayla, I have to ask if my research is correct. Is it true that you have never seen any of the Star Wars movies? Of all the questions you could have asked me. You chose this one. Unfortunately, it is true. I think I may have just missed that boat at that formative time in my adolescence. And then there was really never an impetus later

on to sit down and watch them. The other question that I would love your listeners input on is what order I should watch them in. Because now that I'm going to be sitting down and watching all of them in one fell swoop. Do I watch one through six just in that order? Do I start with four? So the jury's still out on that one. I'll just give you my input as someone who saw the original trilogy when I was a kid and now as a parent have seen all the films. Skip episode one. Just skip it all together. Really? Yeah, you don't need to watch it. You don't need to watch it. Start with episode four, then go to five, go back to two and three, and then end with six. That's my advice. There are going to be people who disagree with you on that. There are absolutely

going to be people who disagree. And, you know, I don't know if you heard this story, but Topher Grace, the actor, was trying to learn how to do editing. So he got himself the necessary editing software and he gave himself as a project uh the the second trilogy of star wars films and he edited those three films down to a single tight two-hour film which i need to get my hands on we all do i i felt like when disney bought lucasfilm they should have just gone to topher grace they give us your copy we'll buy it here's a bag of money we'll put that out in theaters too But unless you have an in with Topher Grace, I think you're in for five, maybe all six of the movies. Yeah, it's going to take up quite a chunk of time, but I think it's a worthy investment.

Don't ask her about Star Wars, but you can ask her anything about banking, finance, dealmaking, and you can catch her every day on CNBC's Squawk Alley. Kayla Tashi, thank you so much for being here. Thank you. Coming up, we'll give you an inside look at the stocks on our radar. This is 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. I'm Chris Hill, and joining me in studio once again, Jason Moser, Matt Argesinger, and Simon Erickson. Halloween is next weekend, guys, and according to the National Confectioners Association, candy sales in the United States are expected to top $2.5 billion. So, before we get to the stocks on our radar, let's just go around the table. I'm looking for an underrated and an overrated. I'm sure we all have a favorite candy, but there's a big candy universe out there, Jason. So, when you look at it, what are you seeing as overrated and what's underrated?

You know, whenever I'm going through my kids' Halloween bags, like, make sure the candy in there is okay. After they're asleep. After they're asleep. Well, they could be awake either way. I'm not really, that's the least of my concerns but anytime i find a peanut butter twix in there chris that's like something everybody talks about twix it's the only candy with cookie crunch you know that's that's all good but the peanut butter twix that i think is underrated uh to me whoppers are a total cop out i feel like you go buy those big bags of candy at the store and you're like oh it's got like

laffy taffy and it's got like hundred thousand dollar bars and oh whoppers what the hell do i do with those. Whoppers are just way, way oversold. O' You know what? You can just drop them off at my desk. Really? You're a Whoppers guy? O' I'm a Whoppers guy. No offense. Let me rethink this. O' I'll start with overrated. I think Smarties are so overrated. The thing is, you can go buy a bag, and there's like a thousand of those things in it, but you'll have a person

staying at their house giving out one of those each. So, Smarties, way overrated. Underrated for me, it's just a personal affair, but I really like Rolos. You don't see Rolos that often anymore. You don't really buy them. Caramel and chocolate. Underrated peachios. These are the little rings that taste like peaches. They've got about 150% of your daily dose of sugar. Saw them eat those

at the desk the other day. They exist. This sounds suspiciously like fruit. Fantastic. You've got to trust me on this one. They're gummies. Gummy-flavored like peaches. Overrated candy corn. Does anyone even eat that anymore? I love candy corn.

You throw a bowl of those things at my desk, I think a little goes a long way with candy corn. I think there's a reason we only see it once a year. Steve Broido, do you have some thoughts on this issue? So, underrated would definitely be the Andy's Mint. I've yet to receive one in a candy bag, but if I were to, I would be thrilled. Overrated Tootsie Rolls. Oh, yeah, that's a good one. They do have those Andy's Mints at the Olive Garden, though, right, Steve? They do, indeed!

Oh, there we go! Now we're connecting the dots! There we go. All right, let's get to the stocks on our radar. Steve Broido, I'll you with a question. Jason Moser, you're up first. What are you looking at this week? Yeah, I feel remiss if I didn't bring up Under Armour here. Ticker UA, they had earnings come out this week, and the market has certainly reacted to the downside here, but it was a very, very good quarter. Are expectations unreasonably high? Possibly. I mean, it's never a cheap-looking stock, but I put Kevin Plank in the same kind of group with Jeff

Bezos. When you talk about CEOs, founders who are passionate and have the drive when it comes to their businesses, they had their first billion-dollar quarter in company history 3. Footwear is becoming just a mammoth part of this company and is continuing to grow very fast. There are so many reasons to really be optimistic about what they're doing and where they're going. Tremendous market opportunity still to go. And I think the market's opening up a little bit of an opportunity here for shareholders that have the ability to think a little bit more long-term. Steve? Are they really adding any value in the shoe arena? I feel like running shoes

and sports shoes and whatnot. I don't know. Under Armour, are they doing anything? They seem like everybody else. Well, Steve, I do know. I actually own a pair of Under Armour running shoes, and I love them. And you know, I should have worn them today with my Under Armour pants. Yes, my Under Armour pants. These slacks, let me tell you, I can't say enough good things on the golf course. They're a delight. Matty Argersinger, what are you looking at? I'm going with Twitter, TWTR. So I love this move by the now-permanent CEO, Jack Dorsey.

he's giving a third of his personal stake in Twitter. It's worth about $200 million. He's distributing that out to employees. Tom and David, if you're listening here. Anyway, I love this move. Twitter just recently went through some layoffs, but now I think Dorsey has the workforce he wants, he's got the focus. He's giving the existing employees a major, major morale boost. He tweeted shortly after this and said, as for me, I'd rather have a smaller part of something big than a bigger part of something small, I'm confident we can make Twitter big. I love that. Steve, do you have a question about Twitter?

As an investor, do you use Twitter to get news? I do. Twitter is my No. 1 source for news, actually, these days. I would be remiss if I didn't mention you can follow this show on Twitter, at Motley Fool Money. Simon Erickson, what are you looking at? Chris, I'm going with Illumina, ticker ILMN. This is a company we recently added in one of my higher conviction ideas on the MDP watch list, so feel free to go check that But Illumina makes genomic sequencing machines. So back in the 90s, we had the Human Genome Project.

It took 15 years and $3 billion to successfully sequence a human being's genome. Now that costs $1,000 and a couple of hours, thanks to the progress that Illumina has made. But personalized medicine is just really taking off right now. Because it's much more affordable, there's biopharmaceutical, there's hospital, you know, customers like these that want to understand how diseases are interacting with each patient that they have. I think this is the right business to play this trend. They're getting 56% of revenue from high-margin consumables, and I really like them right now.

Steve? Why did so many of the genetic companies fail in the early 2000s? A lot of it was cost-related, very high fixed cost to have the machinery, which has come down quite a bit now, Steve. But also, you're getting much better information. So, if you're able to see things at the genomic level and seeing how things are interacting with one another, it increases your chances of success of having a blockbuster drug. Illumina, Twitter, Under Armour, three pretty interesting ideas, Steve.

I don't know. None of them actually sound that compelling to me right now. I'll go with Illumina. All right. Simon Erickson, Matt Argersinger, Jason Moser. Guys, thanks for being here. Thanks, Chris. Thanks, everyone, for listening. Hey, you can subscribe to the podcast on iTunes, Stitcher, and elsewhere. That's going to do it for this week's edition of Motley Fool Money.

Our engineer, Steve Broider. Our producer is Matt Greer. I'm Chris Hill. We'll see you next week.