Motley Fool Hidden Gems Investing - Taking Stock in Cannabis

Episode Date: October 19, 2018

Netflix adds seven million subscribers for the quarter and crushes Wall Street expectations. Analysts Andy Cross, Jason Moser, and Jeff Fischer talk about Netflix’s latest numbers and delve into earnings from American Express, Atlassian, Domino’s, Procter & Gamble, PayPal, and Intuitive Surgical. Plus, Motley Fool analyst David Kretzmann talks about the business of cannabis. Thanks Netsuite. Get the FREE guide, “Crushing the Five Barriers to Growth”, at NetSuite.Com/FOOL. Learn more about your ad choices. Visit megaphone.fm/adchoices

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From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill. Joining me in studio this week, senior analysts Jason Moser, Jeff Fischer, and Andy Cross. Good to see you, as always, gentlemen. Andy Cross. We've got the latest headlines from Wall Street. We will say goodbye to a business icon. And as always, we've got an inside look at the stocks on our radar. But earnings season is starting to heat up, so let's start with Netflix. Nearly 7 million new subscribers were added to Netflix's audience in the third quarter. Shares up a bit this week, Andy, and year-to-date,

Netflix shares up more than 80%. Yeah, good times for Netflix. I mean, if you think about 1 million net ads on the U.S. side, almost 6 million on the international side when it comes to members they're adding. Streaming revenues up 36%, paid memberships up 25%. Paid membership will be their preferred figure going forward to look at when it comes to the member line. I mean, EPS more than tripled. There are now 58 million U.S. streaming households, 79 million on the international side. That's 137 million Netflix subscribers. I know I'm one, and my family loves them. I mean, the usage, it's more than an hour per day per subscriber who uses Netflix nowadays. I mean, that's 5% of the day, right? So, going towards Netflix. So,

The business continues to hum along. The stocks perform really well, certainly very well. I think the growth prospects for Netflix continue to be very attractive. Yes, the stock does maybe look, on traditional metrics, a little bit more expensive, but the profitability curve and the operating model they're building, I think, is really attractive. They continue to pump a lot of money into content programming. That's the real key. That gives them a significant competitive advantage globally, where they now have hundreds and hundreds of unique proprietary shows in the Netflix family. I think that's very powerful when you go out to try to grow your member base into new countries, and I'm excited about the future for Netflix.

Yeah, Andy. So, revenue is now near $15 billion a year, U.S. dollars, clearly. Market capitalization is $163 billion, so more than 10 times that. And as you said, by traditional measures it looks expensive. And I love that it has looked that way for years now, maybe 10 years longer. And that speaks to how the market actually does look long-term, and the market actually is smart. It was looking at the potential of the company, the enormous size of the market, the leadership that Netflix had over anyone else trying to compete with them, and in some regard, the novelty of what they're doing and the build-out potential that they have. So, the market recognized a long time ago that, hey, this shouldn't

be valued on the trailing P.E. It should be valued on where it could be in five years, seven years. I think it's really done that. And I think now that we have the history to look back the past decade and longer, that's what the market's been doing. So, I guess the bottom line is, sometimes you really shouldn't question the market. It knows a lot more than we maybe give it credit for. What, if anything, did Reed Hastings say on the call about where costs are going? Because that's always been one of the big questions about Netflix, is the rising cost of that content. It's great content, but they're paying more and more for it each year. Well, they are, and they just bought

that movie studio out in Albuquerque. They're going to spend a billion dollars over 10 years and create thousands and thousands of jobs for that proprietary content. So, it is getting expensive. The free cash flow from this year to next year, they're estimating, will actually be flat. It will be down. It will still be negative, so it's not actually going to be cash flowing. It will be negative. And they have the debt on the balance sheet that we're continue watching. The earnings coverage, when you look at the ability to cover the interest costs, continues to be okay. It's not phenomenal. It's okay. So, I think the return on the spend is long-term, especially on the proprietary content, which is much more attractive than

when they actually go out there and license the other content. So, yes, costs are going to be a big factor for Netflix, but the growth opportunity globally, especially in mobile, where there are more than 4 billion mobile accounts out there are just going to be the opportunity for Netflix. That sums it up, Andy. It's the growth vs. the cost. There's still a lot of risk here if the growth disappoints and slows down. Let's move on to American Express, which posted record revenue in the third quarter. Profits look good, too, Jeff. Shares of Amex up this week and close to an all-time high. I love the story of Amex. It was just a handful of years ago that they were really

struggling. They were competing against more aggressive campaigns from MasterCard and Visa. And they clamped down on their expenses and focused on their promotions and their offerings to go aggressively into markets where they were losing market share. And now, they've had six consecutive quarters of adjusted revenue growth of at least 8%. Currency adjusted revenue just grew 10% this last quarter to above $10 billion. Earnings per share was up 25% from the prior year. So, yeah, American Express doing really well. U.S. consumer is 32% of billing, and that area of revenue grew by double digits again. And international consumer growth was high at 18%. So, around the world, they're growing. The brand has withstood the

the challenges of previous years, and it looks like their outlook is strong, too. Let's stick with the war on cash. Share of PayPal Holdings up on Friday. Third quarter profits and revenue came in higher than expected. And Jason, the Venmo division looking strong. Yeah, it is looking strong. I think PayPal, generally speaking, they're attacking the commerce industry from so many different angles. And I think a lot of that, a lot of success really is thanks to the fact that from inception, it's been about utilizing technology, mobile, reducing friction, making it easy to move money from point A to point B, no matter where you live. And I think they've done a really good job with that,

expanding beyond just PayPal. I mean, obviously, Venmo, as you mentioned, they have Zoom. So, it is a global business from that perspective. When you look at the metrics, they all indicate good things. Total payment volume up 24% to $143 billion flowing through that network. Transactions, which is essentially engagement, grew 9.5% on a trailing 12-month basis. And mobile payment volume of $57 billion was up 45% from a year ago. So, all signs point to what they're doing is working. Now, in regard to Venmo, it's a good point that Venmo is performing. The results for the quarter showed $17 billion of that total payment volume flowing through Venmo. I think that what we need to do, though, is we need to pay attention

to the coming quarters, because this really doesn't reflect the new fee schedule that they've introduced in regard to the instant funding regarding Venmo. We've seen at least some signs that that might be rubbing some younger consumers the wrong way. So, that, I think is the one thing we really need to keep on our radar, because they are just starting to learn how to monetize Venmo. But again, I think that taking the whole picture into consideration, they're doing a lot of things well, and I think that's what the stock is showing us today. I'll just add that American Express just signed a deal with PayPal to let you pay your bill through PayPal. I mean, if that

doesn't give PayPal even more legitimacy. So, the stock is finally looking less expensive, too. It trades at about 29X forward earnings per share estimates. Sure, it trades at 100X free cash flow, but still, for the growth on hand. It's amazing how this space has changed. You look at it today, PayPal is a bigger company than American Express. That happened seemingly overnight. But I think more and more, you're seeing companies like Visa, MasterCard, American Express, recognizing the fact that companies like PayPal and Square and Stripe, these are platforms born on technology with a new mentality, Visa, MasterCard, American Express, rather than acquiring, are having

to find a new way to participate and partner up with these companies, as opposed to just being left out in the cold completely. So, kudos to American Express for making that happen. I think we'll see more of that kind of stuff going forward. I'll just say, PayPal generates massive amounts of free cash flow. So, Jeff, it is expensive, yes, and it is growing. But the Venmo acquisition, I'm now a Venmo user, I I think they paid $800 million for that business, maybe. I think there's going to be a real healthy return on that business when you look over the next 10 years. From the war on cash to the rise of the machines.

Intuitive Surgical, third quarter revenue up 14%. Shares of Intuitive Surgical down after this report, Andy. But year-to-date, this is a stock that's still up about 35%. That's right, Chris. I mean, it was an actually really nice quarter. I mean, this is just a business that makes the DaVinci robotic systems now that more and more hospitals are using. When you think about sales, up 17% for that business. The procedure growth, the number of growth, the growth in procedures with their systems,

up 20% globally. That's 19% in the U.S. and up 23% internationally. So, the growth of the units and the growth of the services and the procedures that Intuitive Surgical supplies continues to be in demand. It's growing at a really healthy clip. Yes, the stock is up. It's a $60 billion market cap now. It has almost $5 billion of cash on the balance sheet, zero debt. It spent a lot of money buying back stock over the last year and a half or so. So, it sells at around 50X earnings and like 30X maybe operating profits on the EBITDA line. So, maybe it looks a little bit expensive here to me, but I think overall the business continues to perform really well.

Yeah, and one thing we love about it is recurring revenue is now 72% of total revenue. its accessories and instruments related to the machines. Yeah, we were talking earlier today in the production meeting, a friend of mine, a listener, Dr. Chad Huggins, a guy I grew up with and was in Boy Scouts with, he's a physician down in Savannah now, cardiologist, says that those machines are just, that is the new way of doing business. Hospitals are buying those machines, training doctors in every hospital, from HCA hospitals to small-town hospitals. So, from a patient's perspective, I think you have to feel pretty good about that. And from an investor's perspective, I think you have to

feel pretty good about that, too. One important point from the release and the call is that they are now increasing the forecast for the procedure growth from 15% to 17% to 18% for the full year. So, I think continued increasing in the procedures, as Jason mentioned, more and more hospitals getting excited about this is the real future for Intuitive Surgical. I think the business is going to do well over the next five, 10 years. You know those cute cartoon mascots that companies use to sell their products? Turns out one of them is in hot water with the feds. Details coming up. Stay right here. You're listening to Motley Fool Money. All right, before we get back to the news, quick shout out to Bamboo HR. If you have your own small business or medium-sized business or

you work in human resources, you know how crazy it can be dealing with spreadsheets and paperwork and employee issues and so much more. And that's where Bamboo HR can help you. Bamboo HR can manage all your employee data and automate countless tasks in one easy-to-use system so you can focus on the people that you work with. And right now, Bamboo HR is giving our dozens of listeners a special extended free trial. So, try out Bamboo HR for a full 14 days free by going to bamboohr.com. Again, that's bamboohr.com. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Jeff Fischer, and Andy Cross. It's been a rough year for the consumer goods industry, but don't tell that to Procter & Gamble. First quarter sales

growth was the biggest in five years, and shares of P&G up 8% on Friday. Jeff, it's a growth stock. That's a big jump for a $214 billion company. But I wouldn't get too excited about it yet. Even management in the conference call was pessimistic. Chris, what do you want to say? I was just going to say, normally we look to Ron Gross to be the wet blanket in these situations, but I'm glad someone's filling his role. Happy to step in and try to fill those big shoes. So, organic sales were up 4% driven by volume growth of 3%. And they say pricing was neutral in the quarter. And when you're so focused on just trying to grow your volume

however you can, and pricing as your two main focal points, you know competition is a problem. And that's what they proceeded to then talk about for much of the call. They say, actually, the most competitive, challenging environment they've seen in many years, if not ever. I don't want to misquote them from the call, but in a long time. And so, they're worried about the growth of new brands online, pricing competition, shopping consumer habits, all these things. They still expect sales growth, Chris, of all-in with currency of down 2% for the year, more or less. Earnings per share guidance is 3% growth to 8% growth, which is a wide range and really depends on a lot of things, including commodity costs and competition.

nowhere near the high end of that guidance right now. So, even they were the wet blanket in the quarter. Shares of Domino's down a bit this week, despite the fact that third quarter sales were up more than 20% from a year ago. Jason, it feels like Domino's has done so well for so long that they are now kind of a victim of their own success. Yeah, we talk about that with restaurants from time to time. Perhaps that is where Domino's is today. But looking at the quarter itself, it was a very good quarter. So, concerns over domestic same-store sales growth, those should be kept in context. They were good. Perhaps the expectations were flawed, Chris, because

really these guys are selling a lot of food. And I think that, you know, we talked about Papa John's shortcomings this year, and there was a good question on the call where analysts were asking, were they seeing a pickup in share there based on the weakness in Papa John's? And management made a good point that, you know, look, it's not that people are leaving Papa John's and then going to Domino's. The restaurant industry is a really big one, so it's not like they're always just going from one pizza to another pizza. There are all sorts of different choices out there. So, they continue to have to work hard to pick that share up. And I think that's a lot to do with Domino's changing that identity from

Domino's Pizza to being Domino's. They offer more than just pizza at this point, which is encouraging. But it is a growth story still. They do see the U.S. as an 8,000-store business over the next 10 years. They finished up 2017 with around 5,600 stores. Plenty of opportunity to grow that store base. It is an international business. I like what they're doing. I think there's every reason in the world to hang on to the stock, even though they had a little bit of a tepid reaction to this quarter. But if you look at all of the drama that's gone on at Papa John's over the past 12 months, that's got to help them. Just the fact that management at Papa John's is distracted. There is no way it hurts. But it's also

Still worth noting, Pizza Hut is probably going to be a little bit more of a beneficiary this year, thanks to that NFL deal. They've really been able to get out there in front of the consumer. But there's no question that Domino's is capitalizing on it. Good first quarter results for Atlassian. Profits and revenue for the enterprise software company came in higher than expected. Andy, shares falling despite this report. It's still been a great year for shareholders of Atlassian. Yeah, stocks up around 75%. Chris and Mike Cannon-Brooks and Scott Farquhar, the co-founders who own about a third of the company combined, in the letter said fiscal

2019 is off to a great start. And it really is. I mean, the revenue was up 37%. That's slightly down versus last quarter and a little bit from last year. But subscription sales up 55%. Atlassian makes collaboration software like Jira and Trello, which I know a lot of us use in the office, Confluence. It's almost a $20 billion market cap company. It sells at like 19 times revenues. It has $2 billion of cash on the books, about $800 million of debt. It just has historically been a real good growth story. The growth is continuing, but expectations are really high for Atlassian. If they're not absolutely devouring those expectations, investors on a day-to-day basis will sell off the stock.

I think Atlassian should be celebrating today, because we're talking about Netflix, American Express, Procter & Gamble, and then we throw in Atlassian. This is a banner day. They made the headline story on Motley Fool Money. The company has been free cash flow positive for a long time, AC, I can't remember the number of years, but 12, I think since inception, and trades at 70X free cash flow, which is not bad for the growth rate, but like you said, Andy, expectations are high. Still, we like it for the long term. Well, and all kidding aside, it's an enterprise software company, not the sexiest business in the world, and it's a non-U.S. company.

That's right. There is that. For decades, one of the most beloved cartoon corporate mascots was Charlie the Tuna, the animated spokesman, or spokes-tuna, if you will, for StarKiss brand Tuna. Well, it turns out Charlie was also a criminal mastermind, because this week, authorities at Starkist agreed to plead guilty to price-fixing. From 2010 through 2013, Starkist, Bumblebee, and Chicken of the Sea conspired to keep canned tuna prices artificially high. Starkist is facing a fine of up to $100 million. Am I the only one who's excited about this? Chris, I feel like this is all really coming together here, because with the Domino's

Conversation and Papa John's. Perhaps there is a Netflix original show there. The new Odd Couple with Papa John's and Charlie the Tuna Book is clearly two very tainted brands, but maybe there's a story of redemption there. I don't know. Redemption. It makes you question, if you can commit such a crime, what else in your business is not quite what you sell it to be? Are you really sourcing your fish in a responsible way. It's unfortunate. I like the fact that, of these three companies, Chicken of the Sea was the one that turned first. They're not facing any fines. Bumblebee paid a fine of $25 million last year. Chicken of the Sea was the one

that came forward immediately and said, don't hurt us, we'll tell you anything you want to know. There's your lesson, roll early. Really? I thought what we all learned from Goodfellas was, always keep your mouth shut and never rat on your friends. Apparently, the people at Chicken of the Sea never saw Goodfellas. Seemed to work out for them. You know what, though? They're not the ones paying tens of millions of dollars in fines. Alright, Jason Moser, Andy Cross, Jeff Fischer, guys, we'll see you a little bit later in the show. Marijuana is fully legal in Canada. We're going to talk through the investing ripple effects with our man

David Kretzmann. That's next. Stay right here. You're listening to Motley Fool Money. Chris Hill. Welcome back to Motley Fool Money, I'm Chris Hill. Earlier this week, Canada became the largest country in the world to fully legalize recreational use of marijuana. Joining me in studio to discuss the investing implications is Motley Fool senior analyst David Kretzmann. Thanks for being here. David Kretzmann. Thanks, Chris. This was front-page news all across Canada. How big a deal is this? This is a big deal. Like you said, Canada is taking a huge step as the largest country in the world to legalize adult use of recreational cannabis. So, essentially, what this means is,

if you are a resident of Canada, starting October 17th, you can walk into a cannabis retailer or order online cannabis, just like you would walk into a store and buy a beer. So, this is a monumental step. Obviously, up until this point, you've seen Canada and other states in the U.S. and other countries embrace medical cannabis, but this is a big step toward full legalization of recreational cannabis across the board. You've been doing a lot of research on this industry over the past year. I know you've been going to conferences across North America. What does the competitive landscape look like for businesses in Canada? Right now, you have a ton of companies

jockeying for position of this emerging recreational market in Canada. Some of the big players are Canopy Growth, Aurora Cannabis, Afria, Cantress, a variety of different companies that are out there. Up until this point, they've been able to operate within the landscape of medical cannabis within Canada, which is a pretty small market, then all of a sudden, starting October 17th, we'll suddenly be able to see which of these companies are gaining traction with consumers, building brands, things of that sort. So, you have some of these companies that are approaching one million square feet of space that they've dedicated to grow cannabis. But up until this point, you have a lot of these companies that are

saying how great they're going to be. And starting October 17th and in the coming quarters and years, we'll finally get a sense for which of these companies are walking the walk, not just talking the talk. Part of the reason this industry is getting so much attention is because you've got large companies from outside the industry who are either investing directly or certainly kicking the tires. And I'm thinking mainly of the beverage companies, Coca-Cola, Pepsi, Constellation Brands. Why are beverage industry companies so hot for marijuana? Yeah, Constellation Brands, which is best known for Corona, but they have a variety

brands in their wine and spirits portfolio, they really made a big splash in the category last October when they were essentially the first multinational company to say, hey, we're comfortable with this murky legal landscape of cannabis. We see an opportunity here. And they invested in Canopy Growth, which is one of the larger Canadian cannabis producers. And Constellation re-upped that investment in a huge way this August when they invested an additional $4 billion into Canopy Growth, basically saying that they expect this to become a $200 billion global legal market by 2030. So, they see a big opportunity here. I think part of the reason you're seeing these beverage companies, especially alcoholic beverage

companies, taking a close look at cannabis is because in some ways, cannabis is a competitor to alcohol. In a lot of ways, cannabis doesn't have the same caloric content. I think in more and more circles, cannabis is seen as a healthier replacement to alcohol to get that relaxation or that high effect. In states like Colorado, where you've seen legalized recreational cannabis, you're even seeing some headwinds with beer and alcohol sales as people transition over to consuming cannabis instead of alcohol. And even Aspen, Colorado, you have an entire town where cannabis sales are now outpacing alcohol sales. So, it would behoove you, if you are a beverage company, to pay close attention to this cannabis opportunity. I think that's

Why are you seeing more and more of these big beverage companies taking a close look at cannabis? So, Canada is fully legal in terms of recreational use. But here in the United States, we've got a handful of states with varying levels of legality. We've got a few more on the ballot for the midterm elections. But it doesn't seem like we're anywhere close to the same sort of legalization on a nationwide basis as Canada is. Where does the U.S. fit into all of this? Yeah, the tricky thing about the U.S. is that on a federal level, like you mentioned, cannabis is still considered an illicit illegal drug.

The Drug Enforcement Administration actually considers cannabis to be a more dangerous substance than cocaine and meth. So that just kind of shows you where the list of priorities are these days. But at the same time, you still have a variety of states which have taken steps to legalize cannabis in some shape or form. You have over 30 states now that have legalized medical cannabis. So, if you have headaches or some other various ailments, you can get a prescription and purchase medical cannabis that way. You have nine states like Colorado, Washington, California, among others, that have legalized recreational adult-use cannabis. So, in the U.S., you still have kind of a murky situation where the federal government technically at any time now could go and raid states that individually have legalized cannabis. So that does amp up the risk a bit here in the U.S.

And going forward from the U.S. perspective, when you're thinking about the cannabis industry domestically, it's really just a matter of what does the federal government do? President Trump has never really spoken out against legalizing cannabis or at least leaving it up to the states. But at the same time, Attorney General Jeff Sessions has essentially left the door open for the federal government to intervene in states that have legalized cannabis. So, that's the ultimate murky question right now when it comes to legality in the U.S. I've seen a bunch of people over the past three to six months use the analogy of prohibition, comparing the legalization in Canada to the end of prohibition in the 20th century in

the United States. Do you think that is an apt comparison? I'd say that's the closest comparison we have, but it's not a perfect comparison. Prohibition in the U.S. started in 1918. It lasted about 15 years. And the main difference between alcohol prohibition in 1918 and cannabis prohibition up until 2018 is that with alcohol prohibition, before 1918, you still had companies like Anheuser-Busch or Budweiser, which had the facilities that produced the alcoholic beverages, they had the brands, the distribution.

For those 15 or so years of alcohol prohibition, those companies didn't disappear. They just found other non-alcoholic beverages or other products to get into, and many of them managed to survive as companies. And then come 1933, they were able to jump right back into the legal alcoholic beverage market with the same brands, the same distribution, the same game plan. With cannabis, you essentially have a substance that's been under prohibition for almost a century now. So, you don't have any established cannabis brands. You have a bunch of companies that are entirely starting from scratch within the past several years, mainly in Canada, now increasingly in the U.S. and other territories and countries around the world

where legal cannabis is emerging. But that's really why this is an unprecedented move. I don't think there's any corollary where we can point to to say, this is how it's going to be. So, cannabis is really in a league of its own right now. Let's go to the investing side of the equation here, because there are plenty of experienced investors out there who look at marijuana and say, this is a weed. I mean, I have no skill for gardening, but I could grow this thing. This is a commodity. And from an investing standpoint, despite the gains that some of these cannabis companies have put up in 2018, this is going to end badly for a lot of companies. What do you think about that?

There's no doubt that there's a ton of speculation and froth driving a lot of cannabis stocks right now. I mean, any investor has probably seen Tilray dominate the headlines in recent weeks and months. I think at one point, the company was trading for 700 times trailing revenue. So, just an insane multiple for any company, let alone a cannabis producer that really doesn't have an extensive track record yet. So, there's no question that there will be a lot of these companies that do end up going bust or fail to gain traction. I think that's what's so important about October 17th and this legalization movement in Canada, because we do finally have a legitimate and growing legal industry where we can see which of these companies are gaining tangible traction in the marketplace. And I agree with you. I agree

with that idea that companies that are just looking to grow and sell cannabis, that's not really that compelling of a long-term business. It is very similar to any other crops. But at the same time, I think just as products like coffee, tomatoes, hops, those are all technically commodities, you can still build powerful global brands off those commodities. You have Starbucks working off of coffee. You have Anheuser-Busch, Diageo working off of hops. You have the Heinz brand built off of tomatoes. So, even though there are plenty of commodity products out there, companies that can develop the distribution, the brand, the relationship with consumers can build these very powerful global brands. And I think we'll see something similar in cannabis.

But at the same time, from an investor's perspective, you don't just want to assume that any company that's touching cannabis today will automatically be a winner. But the approach that we're taking at The Motley Fool is, we look closer into the industry and these companies, recognizing that this is still very speculative, it's still a very risky corner of the market, because most of the cannabis companies today, they're not trading based on their present-day fundamentals or their historical track record, because most of these companies don't have much of a track record. Instead, the stocks today, they're trading based on future expectations and future hype. But as we're able to see these companies gain traction in Canada or

states in the U.S. where it is increasingly being legalized, then as investors, we can apply more of a capital-F, foolish, business-focused, long-term approach to hopefully find what I suspect will be some big winners in the category. So, for investors who are looking at this category and hearing what you're saying and saying, you know what, all right, let me move away from the ones that are just the producers, where should they be looking? Because it sounds like, as we've seen with other industries, there are, as we refer to them, picks and shovels opportunities, where they're not producing the crop, but maybe they're producing equipment to go with this industry.

Yeah, you have a variety of companies. I mean, I'd say one of the bigger companies is one that we've already talked about, Constellation Brands. That's a company that has a very strong and growing core business, generating a lot of free cash flow. They have a team of brothers who are leading the company. They have high insider ownership. So, a lot of qualities that we'd like to see here at The Motley Fool when we're looking for a business that we want to own for the long term. And they've also been very aggressive, just diving headfirst into this cannabis opportunity. So, that's a company I look at from a picks and shovels perspective, where they have a strong core business, they're making a substantial bet

on the emerging long-term future of cannabis. So, I'd say that's a relatively safer way to get exposure, rather than just immediately diving headfirst into these small pure play companies that don't have much of a track record, and the valuations right now are certainly frothy. So, you have companies ranging from a $100 million market cap up in Canada up to the $40 billion or so market cap with Constellation Brands. Companies all across the spectrum. It's a fascinating category to look into, but like any other investment, you want to be sure you understand what you're buying before you put your hard-earned investing dollars behind it. David Kretzmann, thanks for being here.

Thank you. Coming up, we'll give you an inside look at the stocks on our radar. Stay right here. You're listening to Motley Fool Money. Before we get to the stocks on our radar, I want to say thanks to NetSuite by Oracle, the business management software that handles every aspect of your business in an easy-to-use cloud platform. This is not some one-size-fits-all software. With industry-specific software for a broad range of business, NetSuite works the way that your business works. Thousands of the best own brands and fastest growing companies already use NetSuite to manage their business. And now it's available to you. The power of the world's most popular cloud management system is more

affordable than you think. And right now, NetSuite is offering you some valuable insights to overcome the obstacles that are holding you back. And they're offering them for free. So save time and money by managing sales, finance, accounting, orders, and HR instantly right from your desk or phone. You can get the free guide entitled Crushing the Five Barriers to Growth by going to netsuite.com. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here in studio once again with Jason Moser, Andy Cross, and Jeff Fischer. Guys, before

we get to the stocks on our radar, I just wanted to note the passing this week of Paul Allen, who, along with Bill Gates, was the co-founder of Microsoft. And this week, we saw tributes pouring in, not just from the business world, but also from the world of sports, because he was the owner of the Seattle Seahawks and the Portland Trailblazers. He was also a philanthropist who donated billions of dollars to support the arts, health research, protect endangered species, space exploration. Jeff, certainly Paul Allen, not as well-known to the average person as Bill Gates or Steve Jobs, but certainly on the list with the two of them in terms of one of the most influential business people of the last 50 years.

Definitely. And beyond that, I think the last 25 years have been so meaningful. I've followed him on Twitter and elsewhere through his Vulcan Philanthropy group, which is mainly about conservation and they did the first across all of africa a survey of elephants to to try to get a good handle on the population and the crisis that's going on there with elephants and so so much other work if you're looking for a good film a documentary this weekend go to vulcan productions and they they've done documentaries on ocean conservation and africa as well and others as well so yeah he just i respected him greatly from afar for everything that he worked to try to improve in the world. Also worth noting, Andy, just from an

investing standpoint, he co-founded Microsoft with Bill Gates. He left the company in 1983, three years before Microsoft went public. And he and Bill Gates had a little back and forth on his stock. Gates wanted to buy back his stock. They couldn't agree on a price, so he just held on to it. And that really worked out for Paul Allen. It did do really well. Like you say, Chris, Bill Gates, more well-known, and Paul Allen helped really find the vision of software as they were developing Microsoft. It wasn't always a smooth working relationship between the two, and then when Steve Ballmer, the former CEO, came on board, there was really tenseness there, too. So, it was not always

smooth for Paul Allen, but clearly just such an influential person, and the stock did just phenomenally well, and that benefited so many people around the world, as Jeff said. Yeah, he wasn't as front and center in Chris Davenport's book, The Space Barons, but he was a part of that story. So, I always appreciated his interest in space and taking it to the next frontier, so to speak. And then, hey, I mean, golly, I didn't realize he was such a guitar aficionado. He seemed like a pretty, much like a Renaissance man. He had a lot of different interests and seemed pretty good at everything he did. Two quick things, guys. I have mentioned before that our dozens of listeners can check out

The Motley Fool's other podcasts. Now, you can also check out our new and improved YouTube channel. Just go to youtube.com slash themotleyfool. We've got video clips from all of our podcasts and other things going on here at The Motley Fool. Secondly, shoutout to Jordan Weitz from Potomac, Maryland, by way of Yale University Class of 2020, sitting in behind the glass this week. Jordan, thanks for hanging out with us. Let's get to the stocks on our radar. Our man behind the glass, Steve Broido, under the weather this week. So, speaking of The Motley Fool's other podcast, Rick Engdahl, who produces Motley Fool Answers and Rule Breaker Investing with David Gardner, sitting in for Steve. He's going to hit you

with a question. Jason Moser, you're up first. What are you looking at this week? Well, with election season coming around, I'm going to take a look at Twitter here, ticker TWTR. Earnings are next Thursday morning. In the last quarter, user growth took center stage again, as the company stepped in there to do some culling of bots and active users and whatnot. The longer-term intention is to create a more quality network and try to stanch that misinformation that is seeming to plague us. I'm not optimistic with all of these social networks this coming election season. I think that regardless of the result, I think that the losing party is going to cry foul, and Facebook and Twitter are going

to be right in the crosshairs there. But the upside is that Twitter is now a business that actually makes money. We can judge it a bit more fundamentally. And I think it still does play an important role as a news network and a communication network. So, I'd be interested to see how they see this election season coming up and what they have planned for next year. Rick, question about Twitter? Jason, are you a verified user? Do you have the little blue check? And why isn't everybody a verified user on Twitter? Yeah, I am a verified user. I think everybody should be a verified user. I wish they at least made you use your name, because

I think a lot of, well, I shouldn't say this word, so I'm not going to, but a lot of bad people out there, feel free to say whatever behind the curtain of the internet. Listen, I'm all for just being a nice person. I think it's the easiest thing to do, and sometimes people aren't very nice on Twitter. Andy Cross, what are you looking at this week? I'm looking at Access Financial, the former Bank of the Internet. They report earnings next week. With interest rates starting to move up, the net interest margin that banks are earning continues to move up a little bit higher. Axios has made some really good acquisitions recently, and they are now really

starting to integrate that. So, I'm really looking to see what is the deposit growth going to continue to look like for these small banks. It's only a $2 billion bank, and it's a very well-run bank with extremely well, really good high efficiency margins compared to traditional banks. That's the advantage for them. So, I want to see what they're saying about deposit growth, Chris. And the ticker symbol? AX. Rick, question about Axos? Andy, I just watched Mary Poppins with the kids. I'm just wondering, what does a run on the bank look like on the internet? Well, I guess it's not actually technically

a run, maybe a finger run. So, hopefully we won't see that anytime soon. Jeff Fischer, what are you looking at this week? Going back to American Express, the stock, $91 billion company, trades at 13 times forward earnings. So, it's very reasonable. In a rocky volatile market like this one, this may add some stability to your portfolio. And the company has come through some hard times and maintained its premium brand. And that's now drawing younger, new consumers, including millennials, to American Express. So, the growth that it's earned has been well earned and should continue.

And the ticker symbol? AXP. O' Rick? American Express, Visa, why do we need any more credit cards? Why are there so many out there? Aren't they all the same? Well, they all are very similar, but they're all replacing cash, and so they all work in the same lovely fashion of not needing to deal with cash. And I think around the world, that's just the way we're going. O' Three stocks, Rick. You got one you want to add to your watch list? No.

It's a first. Guys, he said we collectively suck at pitching stocks, basically. Terrible! Alright, guys, thanks for being here. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Rick Engdahl. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening! We'll see you next week!