Motley Fool Hidden Gems Investing - Retail’s New Record and the Business of RVs

Episode Date: May 15, 2020

Retail sales fall more than 16% in April. Uber and GrubHub explore a possible merger. Marriott and Under Armour tumble on disappointing earnings. Diagnostics company Quidel gets a big boost from the FDA. And DraftKings hits a new high. Motley Fool analysts Ron Gross and Jason Moser discuss those stories and weigh in on the best way to build a portfolio. Our analysts share a couple of stocks on their radar: Intellia Therapeutics and Axon Enterprise. Plus, Camping World CEO Marcus Lemonis talks about the business of RVs and shares some insights from his CNBC show, The Profit. Thanks to Molekule for supporting our show.   Get 10% off your first air purifier at http://www.molekule.com with code “fool10”.     Learn more about your ad choices. Visit megaphone.fm/adchoices

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Your trading platform can be too. With Thinkorswim, you can customize screeners, charting, and stock forecasts, so the market is always tailored to you. You can get started at tdameritrade.com slash thinkorswim. All right, let's do the show. Everybody needs money. That's why they call it money. The best things in life are free, but you can give them to the birds and bees. Chris Hill. 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 as always, gentlemen. Hey, Chris. We've got the latest headlines from Wall Street. Marcus Limonis, host of The Profit, is our guest. As always, we've got some stocks on our radar. We begin once again with the big macro. Retail sales in April fell more than 16%, percent, the worst drop on record. Ron, we're going to get to a few of the ripple effects in a minute, but consumer spending typically drives about 70% of America's economy. I don't know how many more months like this we can take. Yeah, brutal, but I mean, perhaps not surprising. We're all under stay-at-home orders, or at least we were until recently, 36 million of us filing

claims for unemployment. This has got to show up in the numbers. And some of the worst-hit sectors are ones that we probably could have guessed. Clothing down almost 80%, furniture down 60%, not a lot of people buying furniture nowadays, although I will admit that I did. So, I helped that number just a little bit. Bars and restaurants, not surprisingly, down 30%. The one bright spot, and we probably could have guessed this as well, is non-store retailers up about 8% for the period. Obviously, all of us shopping online, my family certainly doing their part to help the Amazons and other e-retailers of the world. But this is a brutal number, that's why so many states are pushing to reopen, I just

hope it's not too soon and we fall back, but the economy certainly needs to get kick-started just a bit. Yeah, Jason, from time to time when we talk about bricks-and-mortar retail, we talk about the different tiers for malls and sort those tier-one malls being a little bit safer and more stable than tier-two or tier-three, I think everything is up for grabs now. Yeah, I think you're right. I mean, this environment really isn't discriminating for the most part. Now, there is an exception there. Ron, I thought that was pretty interesting, you guys got some furniture. We got some furniture, too.

We got a nice, lazy, but like, a recliner, and we got this big ottoman. So, yeah, maybe, you know, I don't know, maybe there's something there. But, yeah, I mean, listen, it was a bad month for most, but not quite all. I mean, the non-store retailer is up 8.4% and to that point on furniture, you know, we saw some quarterly reports here with Wayfair and Etsy that were both very encouraging and I think really shine a light on the opportunity that exists with business models like those, where they're just really virtual networks connecting suppliers with buyers. But, I mean, Wayfair stated in their call, starting in mid-March, they saw a pickup in

traffic and conversion with increasingly strong repeat behavior, coupled with an acceleration in new customer orders, and that went on into April as well. Etsy noted that April was about so much more than just masks. I mean, interestingly, their platform, they really have sold a lot of masks during this time for obvious reasons, but they even broke out non-mask sales on the Etsy core marketplace or up 79% from last year. So, you're seeing, obviously, a lot of trouble everywhere, but there are pockets of opportunity there and I think it really, you see the way that Wayfair and Etsy stocks have performed

this year, it starts to make a little bit more sense when you see how these businesses perform during the month of April and going on into May. Yeah. And then you counter that with the traditional retailers, whether they're mall-based or department stores, that standalone, Dillard's, for example, reported this week. Listen, all 285 stores were closed for a part of this period, what are you going to do? That's completely devastating, 90% of employees furloughed, salary reductions for executives. Now, the investing community is focused on the future, as typical for stocks in the stock market. And Dillard's stock has reacted pretty well, because they reopened 45 stores on May 5th,

an additional 80 on May 12th. 116 more will be open next week. Slowly, things are starting to reopen. As I said, I hope it's not too soon. But looking towards the future, they think they're going to start to generate some revenue again. So far, about 56% of revenue has been recaptured, and that's even with reduced hours at Dillard's. So, I mean, we haven't talked about Dillard's on the show forever. Mac earlier said, I can't even believe still a company, but it's an example of a completely, you know, a meshed brick-and-mortar retailer that, you know, has just been, you know, had a really tough go of it. You know, Jason, Ron mentioned bars and restaurants.

We got some pretty scary data out of OpenTable this week, and when you think about restaurants in particular trying to reopen, they've got to do it at reduced capacity and long-term, you have to believe a lot of them aren't going to survive. Yeah. I mean, I think the data that OpenTable released, I mean, it was something like one in four restaurants just won't ever come back. And when you look at that actual industry, I mean, it's $850 billion-plus in sales annually. I mean, that's a big market when it comes to our overall economy here. And the restaurant business is really difficult to begin with.

I mean, there is just a high failure rate because it's very low barriers to entry, very competitive, hard to maintain, like, sustainable success, really. I think that going forward, I mean, it really feels like we are going to see the cost of business go up for restaurants on a sustainable basis. I mean, I think that for many restaurants, they're going to have to figure out a way to incorporate those costs into the operations, whether it's just through hiking prices and food. I wonder if it's not a better idea to just be blatantly obvious about it and on the bill note that you've got PP&E costs or cleaning and sanitization costs, because perhaps if customers

see those line items broken out, they feel a little bit more confident that the restaurants they're going to are actually looking out for them from that perspective. But yeah, I mean, it does go to show, really, the scale when it comes to restaurants is a big advantage. And even that scale doesn't necessarily mean it's going to be easygoing. I mean, Starbucks is out they're right now negotiating with their landlords to lower rents by up to 40% for a year. And that's Starbucks, one of the most powerful food and beverage operations in the world. Yeah. Your point, Chris, on mall real estate is well taken. And the closings of these restaurants are going to obviously exacerbate that outside of the mall space. So, we're going to have

a lot of problems in the real estate market. I just saw this morning Manhattan new rentals down 71%, vacancy rates the highest in 14 years. I'm not sure that abates anytime soon, so it's something to really watch carefully. Well, and you have to figure a business as large as Starbucks probably has some leverage here, because if you're in the commercial real estate business, guys, whether it's traditional office space or retail and restaurant space, you're looking at a very uncertain future, aren't you? I would think so. I mean, you know, we saw it a little while back with Cheesecake Factory basically drawing a line and saying, hey, we're not going to pay rent because we just can't.

I mean, yeah, they probably could have pulled a few levers to make that work. But, I mean, it is good to note that point, that as a tenant, the deck isn't always stacked completely against you, particularly if you've been in a location for a long period of time, if you're seen as kind of an anchor location or one that generates a lot of traffic. I mean, there's more than one entity in that value chain, right? I mean, there are banks that are providing those mortgages and borrowers who are serving as the landlords. I mean, this affects everybody to an extent, so it probably favors most to be open-minded, perhaps negotiate some lower rates for a specific amount of time,

understanding that this will eventually pass. The real question is, what does that new normal look like? because I think that we have to kind of come to the realization that we're going to be living in an environment where COVID-19 is just part of our existence, right? I mean, it's not like we're just going to eliminate this thing from existence, but we can't just hunker down and shut everything down for the next year or two years either. When it comes to the restaurants, you know, there are a lot of industries where you look at sort of the higher end players, maybe they've got better margins, that sort of thing. And in rough times, they're in safer condition. When I think

about the restaurants, I actually think it could be the reverse because a high-end steakhouse like the Capitol Grill, which is part of Darden Restaurants, they may be in more trouble than a burger place like McDonald's, which has built its business in part on delivery. It's not about the in-restaurant experience at McDonald's. I totally agree with you. I mean, I think that the restaurants that are focused less on the in-facility dining experience, whether that's fast-casual like Chipotle or your quick-serve like McDonald's. I mean, I think those restaurants going forward definitely have a leg up here, because people, generally speaking, you're not looking for that lovely ambiance that you're going to find in a Chipotle or a McDonald's.

Not to say that eating there is a bad thing, don't get me wrong, but there is a difference there. And so, I do feel like the quick-service restaurants and the fast-casual restaurants are going to come out of this, or they at least have the opportunity to come out of this in a bit better shape, particularly when you add that delivery dynamic to the model. But I do think that restaurants are notoriously known as bad investments, because those mom-and-pop ones, you know, they've got a dream and they open up the local Italian restaurant on the corner, or the Greek place, or the Mediterranean place, what have you, it's a tough business, competition is unbelievable.

And it's those are the guys that are going to go out and not come back, versus the bigger guys who can access the public markets to raise capital, float a debt offering, a bond offering, get them through to the next stage. Maybe they'll have to pare down their square footage and their footprint and maybe close some stores, but I think they will survive because they have access to capital. Speaking of delivery, shares of Grubhub up more than 15% this week on reports that Uber is making a bid to buy Grubhub. Jason, Uber has Uber Eats. You throw in Grubhub, they've cornered the market. Is this a good move? It could be. I mean, when you look at the economics of food delivery, I mean, that's a really difficult market. We've seen that

just through Grubhub's financials and even Uber's financials as well. It's a market that doesn't really reward exclusive relationships. And so, I mean, it does make sense for Uber to be looking at it this way. It leverages that network that they already have. And we've talked about that a lot about how they're going to leverage that network into additional offerings in order to ultimately build a sustainably profitable model. I think the bigger question really does come on the regulatory front, because when you think about it, the combined entity here would control well over half the domestic market in delivery. That could be construed as a long-term negative, but there still is competition

out there, so who knows? I mean, you could argue that blocking consolidation would actually put smaller competitors out of business, because the economics are so tough anyway. But I mean, we've definitely seen where Uber Eats has gained a lot of traction here. I mean, in their most recent reported quarter, they generated $4.7 billion in gross bookings, that was up 54% from a year ago. Net revenue accelerated to 124% growth from a year ago. The take rate has gone up to 11.3%. And it is working its way towards contributing more to a profitable model for Uber.

I think really the bigger question, it would be on the regulatory front, but I don't think it would be blocked. So, it's a move that certainly makes sense, I think. Here's a company we've never discussed before, Quidel. Quidel makes diagnostic healthcare products and shares were up more than 20% this week after the company got emergency approval from the FDA to distribute a new type of COVID-19 antigen test. The test is designed for rapid detection of the virus. Ron, it seems promising. And our own David Gardner once again looks into the future earlier than others, recommended this back in March, I believe,

and it certainly has panned out well so far. Very encouraging. The difference between this test and others is, it actually looks for pieces of the virus itself rather than for antibodies of the virus, that allows the test to be done more quickly in 15 minutes or so, with a relatively good accuracy rate of about 85%. And also the exciting part is that the infrastructure is already in place. It uses these machines called SOFIA machines, which are produced by Quidel, and there are already 40,000 of them in doctor's offices around the country. So this is very exciting, what I hope will be one of many breakthroughs in testing and diagnostic testing, and then eventually vaccines to get us to the other end of this pandemic.

More headlines after this, so stay right here. You're listening to Motley Fool Money. All right, before we get back to the news of the week, quick shout out to Molecule, which is reimagining the future of clean air, starting with the air purifier. Their technology has been personally effective and verified by science, but most importantly, it's been tested by real people, including me. Molecule's given allergy and asthma sufferers around the country an all-new experience,

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purifier in my room destroying pollen. You can get 10% off your first air purifier. Go to Molecule.com. Use the promo code FOOL10 at checkout. That's M-O-L-E-K-U-L-E.com. And use the promo code FOOL10. All right, let's get back to the show. Welcome back to Motley Fool Money. We're still here with Jason Moser and Ron Gross. Shares of Marriott International falling this week after net income in the first quarter fell more than 90% compared to a year ago. Ron Marriott has a rock-solid brand. How's their balance sheet? Because this might take a while. Their balance sheet is okay, but they were smart. And in April, they raised $2.5 billion

additional through debt to shore it up because they already had $12 billion of debt and only $1.8 billion of cash. So, a smart move. What can you say? A brutal time for them. Revenue per room, otherwise known as Revpar, down 22.5% for the quarter. But that doesn't even tell the whole story, because this got really bad in April, where that plummeted to being down 90%. 25% of their 7,300, 7,400 hotels are closed. One bright spot is they do see China is recovering. Occupancy there hit 25% in April, which sounds horrible, but that actually is an uptick and shows perhaps some recovery. You mentioned net income, at least there is net income, they are still positive, not losing money, adjusted EBITDA $442 million, it was still down 46%, but they're not burning

through cash in that sense. And as we said earlier, their balance sheet looks okay, and they firmed it up through a debt offering. So, you know, obviously, they're halting further share repurchases as all folks are, canceled dividend, furloughing lots of folks, including two-thirds of their 4,000 corporate workers. We'll see what the next quarter brings. Under Armour's first quarter sales fell 23%, and that is about how much the stock fell this week too. Jason, this is why we diversify, right? So, I can look at my portfolio and see that my shares of Under Armour are balanced out by things like Starbucks. Hey, listen, I've got a small position in Under Armour too, so it's always nice to be able

to look at those winners offset these losers. I mean, speaking of taking a while, Chris, investors may want to pack a lunch, because I think this one is going to take a while. You mentioned sales falling 23%, it was 22% excluding currency effects, they attributed 15% of that to COVID-related impacts. And that really, a quarter ago, they were calling for revenue to fall between 13% and 15%. So, it got worse than even they expected. By the end of March, more than 80% of their China locations had opened. At this point, substantially all of them have reopened, traffic is slow to come back. you know, they've got a lot going on here. They are restructuring and now they've got to figure

out how to restructure and implement a new strategy in the face of a difficult environment for obvious reasons. At least, you know, everybody is kind of going through the same thing right now. But I will say, I mean, Planck was not on the call. I think that's a positive. It does feel like this business has moved on from him as the CEO. They did name a new Chief Product Officer, Lisa Collier, who has ample experience in the industry as well. So, there is a strong brand here. I mean, I would make the argument that the brand is probably worth more than the entire market cap of the company today at around $3 billion. But there's no question, they've got a lot of work to do. We've just added to the degree of difficulty here. So, it's going to

take some time. DraftKings' first quarter loss was bigger than expected. So, naturally, shares of DraftKings rose 10% on Friday, hitting a new all-time high. Ron, there's no sports. How much better is this stock going to be when we actually have sports to bet on? You know, I think investors are focusing on the comment that they do not see a COVID impact on Fiscal 21 and beyond. So, again, a short-term impact here. They recently completed a reverse merger, so they're a public company now, they're well-capitalized, $400 million, $500 million of cash on the balance sheet right now. Listen, revenue was actually up 30% for the quarter, but it was tracking at being 60% up before COVID hit. So, clearly, it's still

up there. But without sports, they're creating new offerings, everything from e-NASCAR to pool contests covering the democratic debates, keeping people engaged, keeping people interested. So, once sports do come back, things will get moving. 14 states right now considering betting legislation, which would certainly help the business. So, I could bet on e-NASCAR or I could bet on a political debate? You could have a pool, a fantasy pool of either one. You take your pick, Chris. All right. Ron Gross, Jason Moser. Guys, we will see you later in the show. Up next, a conversation with businessman and TV host, Marcus Limonis. Stay right here,

you're listening to Motley Fool Money. money used to go like it had wings. When he had queens, somebody else had kings, and every night he'd just sit there donating all his coins. He'd say, boy, I'm going to play it right tonight. I'm going to watch them cards, and I'm going to play them tight, and then when I come in there, son, my hand's going to be a peach. Well, he played them tight, but after a while, he done lost himself a considerable pile, so he got mad, and he stood up, and he made this little speech. Chris Hill. Welcome back to Motley Fool Money, I'm Chris Hill. You may know Marcus Limonis as the host of CNBC's popular primetime show, The Profit. He's also the CEO of Camping

World, a company that specializes in recreational vehicles. Recently, Motley Fool senior analyst Bill Mann caught up with Limonis. They talked about long-term disruptions, the changing demographics of RV buyers. And Limones kicked things off by explaining the business of Camping World. So Camping World is the world's sort of leader in selling, servicing, financing RVs. We also have an aftermarket business called Camping World that is sort of the accessories for inside and outside your RV. And then we have our third leg on the stool, which is called Good Sand, which is our annuity business, where we sell insurance, roadside assistance, warranty, credit card club to the installed base. And so the best way to think about it is if you took

AutoNation, AutoZone, AAA, and you mushed them all together for the RV space, that's us. And we sell about one out of every five RVs in America. And we do that through 168 dealership locations, dealership retail locations across the country. And then obviously we do it online and through our call center. And so it's been a business that I amalgamated starting in 2001. In 2016, we went public. Kind of an interesting capital structure. So I own 36 million of the 88 million shares myself. But we also have what's called an up-sea structure, which aggravates people. And the up-sea structure really gives me the golden share. There's very few companies that have it. I actually have the golden share, which means that if there was ever a necessity for a

large vote, the golden share actually creates a scenario where there's just one vote. And when we went public, it was a very controversial thing that somebody that owns, you know, 40% of the business control 100% of the vote. And the answer is welcome to 2020 COVID. You're going to be glad that I have it. Because in this environment, I know the business better than anybody else. And I definitely made some business mistakes in the last two years. I tried an acquisition out of a bankrupt company. It cost me about $100 million plus or minus. I don't have the exact number. We had to shed ourselves of that. So that was a mistake that I made. We've recently in the last six months gotten back to just our core business. We did not close any of our locations

during this crisis we were not required to because homes are an essential business people need to be able to run their water run their electric run their heat run their air conditioning and so we were exempted in every single market that we operate number two keep in mind that you have been locked up in your house for a while and you're not going to go to football games you're not going to go to concerts you're not going to go on cruise ships you're not on airplanes you're not going to go anywhere where there's people but you want to actually now that you know who your family members are because you've spent a month with them you're going to want to go out and see this country and so we uh we if i could pick any business in america to own right now and i didn't

own it i would own our business because of where i know the consumer is going and where i know they've been for the last 30 days so you did lead into uh into what i thought would be a you know a very interesting part of our conversation and one of the things that i think about as an as an analyst is that certain things i you know i fully believe in humankind's ability to beat a semi sentient being like we are going to beat the virus like we are going to win it's a question of how question of how long certain things though are not going to go back to where they were before What are some of the things that really impact camping world that you think may be a permanent change because of changes of habit? Well, I haven't found anything to be totally candid with you. I haven't found anything that I think is going to be a permanent for the negative. I don't know that I found anything that I think is going to be negative.

other than we need that credit market we need that we need the credit market to sustain itself and what happened to us in 2008 and 9 wasn't that demand went away it was that credit went away and so our business boat business dealership business hog all those sort of types of businesses people think that oh it's a visionary thing look you can buy an rv for 100 bucks a month okay and I don't want to hear that, oh, people don't have discretionary dollars. People will find $100 a month if there's no other activity to do. There's literally not much to do. The benefit that we have, while it's terrible because the schools are closed and people have their kids running around their house, is that summer is starting months earlier, months earlier than it normally

would. Summer could potentially, in certain markets, last longer than it normally would. You couple that with the fact that people like the freedom to move around. They want to travel. We've seen more corporations investigate the purchase of RVs as a mode of spaces, transportation, a replacement of whatever it may be. I can't think of anything that's going to permanently affect us other than, unfortunately, in the short term, I don't see people going to Disney World's, the equivalent of Disney World.

not Disney World specific, excuse me. I don't see people going on cruise ships. I don't see people traveling overseas. I don't see people rushing to go visit their mom on a plane, but they may take a road trip. They may take a road trip. And so I'm encouraged by people's resiliency, but I am concerned about how their behavior is going to change. And we think we're positioned pretty well for it. Have there been changes over the last few years in terms of the in terms of the demographics of people who buy campers? Yeah. So, two primary things. We've seen a massive increase in the diversity of the consumer.

It was typically, in history, years and years ago, it was predominantly a more Anglo-type product. We've seen a massive change in the diversity, which we think is excellent. The second thing is we've seen a big shift in the age buckets. And so historically, it was like your father's Oldsmobile. It was just an older, it was an older crowd. And part of that shift was that historically, the RV business was driven by motorhomes years ago, 20, 30 years ago. It's now driven by towables. And as the towables got lighter and smaller, 17 feet with a single axle for 98 bucks a month that you can pull with your Prius, it changed the landscape. And so as the unit got lighter and smaller, the age group got lower, much younger because the portability

of the product, the ability to store it, the ability to drive it, the ability to not have to buy a big truck. It all changed dramatically. It all changed dramatically. So it has widened the funnel. It has definitely widened the funnel. And we think that it's going to continue to do that. And millennials, by the way, for some crazy reason, they don't want to work. They don't want to show up on time. They want to get paid a lot of money and they want to be the president, but they also love camping. I'm on the other side of the whole millennial argument from you. I think that these are the people who are going to save America. They're going to save America, but I'll tell you this, and I'm not that far from it. I'm a young

guy. They're going to save America because they're going to bring America to a place where material things matter less, being nice to people matter more, giving to others matter more, and technology matters more. So those basic tent poles of who they are is fine, but I will tell you in my experience with millennials, and I love razzing them about it. They do like to not work. You like to have that work life that you and I aren't used to. And so I end up having to have conversations with a lot of them like, Oh, okay, I know you want to work nine to three. And I know you want a two hour siesta from 11 to one to read a book or write a book. But that's just we just can't do our jobs. I'll let you go at four, but not not not 11. I want to shift just a little bit

and talk about the magnificent show that you've been doing since 2013, The Profit on CNBC. Could you talk a little bit about what isn't necessarily seen on the show? Tell me a little bit about your process for evaluating the companies that you end up putting money into. Yeah. So, on an annual basis, I get about 40,000 applications a year. I'm sure this year, it'll be 400,000 applications because of the crisis, right? And most people are stuck in the process exactly like what you see on TV. So I choose not to do any due diligence before I get there. I know about the company to a degree. I don't see any financials. I know nothing that they're sort of in their work other than what industry and who they are, where they're located,

etc so you know what lane you're driving in but that's about it yeah kind of kind of and when i originally started the show i did it for a couple of reasons and so i i look at that part of my personality i split my my very capitalistic uh personality in the world and my and my sort of my semi-capitalistic educator personality into the profit and that's really how i bifurcate my personality. And part of the reason that I did the show is to create an educational platform for people to learn how business works. And it really wasn't driven towards people like the folks on this was driven towards a younger generation who I wanted to make owning a business cool again. People want to play basketball. They want to be a rock star. They want to be in the NFL. I said,

look, the cool factor isn't doing those things. It's being a business owner and it's helping people in their business and it's making money and doing good at the same time. And I wanted to build a curriculum that allowed people to understand the different nuances. And I think the single biggest compliment that I've ever been given in the history of the show was I was doing a photo shoot one day after season three, I can't remember, season two or three, and my phone rang and I answered the phone and I said, you know, hey, this is Marcus. And you could actually just google my phone number marcus limone i don't know how the person got it and on the other end of the phone this person said to me hey i just wanted to call and tell you that i really really really

enjoy your show my family and i watch i have my staff watch it um we talk about it uh in our executive meetings uh and i i said well thank you uh who is this you know yes sir thank you may i ask who's calling he said yeah this is jamie and i said well yes sir um i'm sorry i i apologize I must've missed your last name. He goes, Oh, this is Jamie diamond. And I said, um, Oh yeah, no, that's funny. Uh, I appreciate it. He said, no, no, I was, uh, no, this really is Jamie diamond. You want me to tell you your account number at my bank? Uh, and I said, uh, no, sir, seriously. So he said to me, the reason I'm calling is, is that we're going to get heavy into the show because we believe that as a big bank, in order for us to have big clients, they have

to start as small clients and they have to have these basic fundamentals about their business and what you're teaching people applies to a fortune 100 company applies to a very small business on main street these basic principles about the ethics of business and the the the requirement to know numbers and they're required to do good by people the inquirement and the requirement to hold people accountable yeah yes it's you said all these companies want to like treat small businesses they're a charity case and just give them grants and give them money and do this and that why don't we just treat them the same way the big business accountable invest in them ask for equity uh put put loan documents in place sophisticated give them metrics to perform

by hold them accountable for their inventory and their balance sheet and don't ever let them use i'm small as an excuse because really that would be like your kid saying i don't know how to ride biker with training wheels and say, well, you're not going to ride a bike if you can't learn this way. Chris Hillman. Coming up, we're going to dip into the Fool mailbag and we've got a couple of stocks on our radar. So stay right here. You're listening to Motley Fool Money. water and electric in a place to drain the septic any koa is a-okay as long as i'm with you so come on hit your wagon to the living room i'm dragging if i can't bring you to my house Before we get to the stocks on our radar, quick shout out to TD Ameritrade. In these unprecedented

times, having access to the right information can help you make better informed investing decisions for today and tomorrow. TD Ameritrade is committed to providing you with a range of relevant educational content like timely articles, informative webcasts, and even access to daily live market news so you can stay on the path to becoming a smarter investor. To learn more about their breadth of resources, just go to tdameritrade.com slash market hub. TD Ameritrade, where smart investors get smarter. Chris Hill. 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 once again. Our email address is radioatfool.com. Drop us an email, would you? We're lonely. We got a note from Aaron Burton in Denver, Colorado. He writes, Guys, my girlfriend and I love your show. And I have a question. Do you advise placing a cap on the number of companies to own? If so, what is the cap and why? Thanks for the great show and keep up the good work. Thank you, Aaron. Thank you for listening. Ron, what do you think? Should you cap the number of companies you own? I think that's a good question. It depends on how closely you want to follow your companies. If you intend to just check in every now and then

and buy a stock and really just hold it without much interference from yourself, you probably own upwards of 50 companies, I know plenty of folks do. If you intend to be more hands-on and review these companies quarterly or even annually, that might be a bit much. It's hard to follow really more than 20 or maybe 30 stocks. So, it depends on what your level of participation is. I will add that the more stocks you own, the more you're going to start looking like an index fund and start mimicking the market as a whole. And you can do that much more easily by just buying an index fund. So, be careful about not getting too many stocks. Although, Jason, we talk from time to time about the concept of leash. How much leash do you give

a certain company? And let's face it, if you're buying some companies, you can essentially ignore them because you know they're going to be fine for decades. Yeah, you definitely can. I mean, On the one hand, you've got Warren Buffett who says, diversification is protection against ignorance. It makes little sense if you know what you're doing. That's a little odd coming from someone like Buffett, who we really look to for a lot of advice. And I guess in his case, maybe that makes sense. Most people probably are better served by diversification. The flip side, you look at someone like Shelby Davis, who ended up owning hundreds of positions at the end of his life. And in a lot of that, he just kind of bought, just sort of let him run, right? And it

of worked out well. I think Ron's right. You do risk, when you start over-diversifying, you risk that Peter Lynch diversification in getting underperformers in there and kind of letting them kind of stay in there, and that drags the portfolio down. So, it is different for everyone. I mean, typically 20-30 holdings is probably pretty safe, as long as you have an idea of what you're doing. For most people, I do believe that owning an S&P 500 index fund is a must. Even if you're going to be investing in individual companies, have some of that money plunked away in just an S&P index fund and let that kind of keep on growing so you can ensure yourself market matching. All right, 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 this week? How about Intellia Therapeutics, NTLA? It's part of my eight-company biotech basket. It's one of three gene therapy companies that are focused on the CRISPR-Cas9 gene editing technology, along with the other two companies, Editas and CRISPR. Stock has kind of traded in a range ever since it took a beating back in September of 2018, but this week got a nice 20% bump on some really good news about the development of treatments for two diseases. And that's what I need to dig into a little bit more because I'm not a scientist and understanding these things sometimes takes a bit of time. $250 million cash, so decently

capitalized, should get them through at least the end of 2021. Dan, question about Intellia Therapeutics? Well, much like Ron, I am also not a scientist and I know nothing about genes, but I do know a thing or two about jeans, and I'm talking about pants. So, Ron, do you have a favorite style of jeans? Not the low-waisted kind, having the kind from, like, the 80s would suit me fine. A nice pair of Gap jeans, which my wife does not like, but I do. Jason Moser, what are you looking at? Taking a look at Axon Enterprise, ticker AAXN. You probably recognize this company, if I told you, they make tasers, and those are the conducted energy weapons.

They substitute themselves for guns, obviously, with police forces everywhere, and the general idea is, they're focused less on killing people, right, they want to preserve life, and that's why their solutions make more sense. So, they do make the taser, they also make the software and sensors that go with it, they are the market leader, not only in the conducted energy weapons, but on officer body cameras and in-car cameras, as well as their digital evidence platform called Evidence.com, something you wouldn't have found in last year's 10K, but that is in this year's talk of their suite of augmented reality and virtual reality training services for law enforcement. That piqued my interest, and this is a really neat business with a pretty

unique competitive advantage, so one I'm digging more into. Dan, question about Axon? Jason, are you finding lots of opportunities for self-defense during the global pandemic? Well, Taser is definitely one of them, and I'm researching a couple of other companies that are in that line of work, but I'm not going to spill the beans right now, Dan. That'll be revealed at a later time. What do you want to add to your watch list, Dan? I'm thinking Intellia Therapeutics, Chris. Nice. All right, Ron Gross, Jason Moser, thanks for being here, guys. Thanks, Chris. That's going to do it for this week's show. Our engineer is Dan Boyd, our producer is Mac Rear. I'm Chris Hill. Thanks for listening. We'll see you next week.