Motley Fool Hidden Gems Investing - The Best Investors & Their Worst Investments

Episode Date: June 22, 2018

Disney increases its offer for 21st Century Fox. Kroger delivers. CarMax and Winnebago rev up. GE gets the boot. Starbucks cools off. And Chipotle expands its menu. Ron Gross, Jason Moser and David Kretzmann analyze those stories and share a few stocks on their radar. Plus, Ritholtz Wealth Management Director of Research Michael Batnick talks about his new book, Big Mistakes: The Best Investors and Their Worst Investments. Learn more about your ad choices. Visit megaphone.fm/adchoices

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I'm Chris Hill. Joining me in studio, senior analysts Jason Moser, David Kretzmann, and Ron Gross. Good to see you as always, gentlemen. Hello. We've got the latest headlines from Wall Street. Michael Batnick from Ritholtz Wealth Management is our guest this week. And as always, we'll give you an inside look at the stocks on our radar. But we begin with the ongoing clash of the titans.

A week ago, it was Comcast raising the stakes in the bid for 21st Century Fox's entertainment assets. This week, Disney returned fire, upping its bid to $71 billion in cash and stock. Jason, that is a big jump over their original offer of $52 billion. It is a big jump. And everybody wants us to make a call, Chris. Who's going to end up getting this Fox asset in the end? I'm going to go ahead and make the call. I'm telling you, it's going to be Disney. Are you getting a lot of people asking you to make this call? It does seem like it. We have some requests here and there, and I imagine all of our listeners

want us to take a stance, too. So, I'm taking one, Ron. Listen, I think this is something that is very much in Disney's wheelhouse. They are viewing this as getting the intellectual property, the content, the characters, all of these stories. They have a very rich history of developing worlds like these and then monetizing them in very meaningful ways over long periods of time. So, I think Disney really wants this deal. Comcast, I feel like, wants it, but I feel like maybe they feel like they need it more than anything else. And I think there's some desperation there that may not ultimately end up working out in their favor. Disney may overpay, it might seem, in the near run here. But there's a lot of backstory here.

When you read a little bit more about the relationships between the executives at Comcast and Fox. It really does feel like Fox would much rather be a part of the Disney family. And if you're an investor that can look out five, 10 years and see the benefits there that Disney could gain from this deal, I think it begins to make a little bit more sense. $71 billion is a lot of money. So, I take a step back and I just wonder, is there a potentially better way that Disney could allocate this cash? Either developing new franchise ... I'd like a dividend. Dividend would be a good idea for Agra there.

He wants the Obi-Wan Kenobi spinoff. I mean, that's what he's gunning for here. Well, see, as a user and potentially as an investor, I feel like Disney should be throwing a little bit more of that cash at Lucasfilm because apparently they're putting Star Wars spinoff movies on hold. The whole Lucasfilm segment is kind of in disarray. They've had directors coming and going. A lot of disagreements, apparently, over the vision for Star Wars. You've got to figure out Star Wars and Lucasfilm.

They need to get that together. Well, Ron, to David's point, right now, we're talking about $71 billion. Comcast is absolutely going to come back with a higher offer, aren't they? Conventional wisdom is yes. It will be high enough to make the difference. I don't know. We're getting into big, big numbers. Not like $52 billion originally wasn't big, but we're getting into the $70, $80 billion number. There comes a time where it stops making sense. Yeah, I'm not convinced they will come back with another counter. When you read a little bit more into the backstory, with the friction, the tension between these two companies and

these executives, I can't help but wonder if Comcast doesn't see the writing on the wall here. They're just going to have to let this thing go and get focused on business as usual. But here's the thing. Yes, there are other ways to allocate this money, but if you're looking to acquire large entertainment assets, there's nothing else out there that's like this. There's no consolation prize for whichever company doesn't end up with these assets. True. And I agree with that totally. And I think that's why Disney ultimately ends up with this, because again, it's right in their wheelhouse. You've got to work a little bit more to connect the dots to really see the value. With Comcast getting this deal,

with Disney, it just seems like it's a much more clear light at the end of the tunnel. I agree. I think Disney ultimately wins out here. But please, Obi-Wan Kenobi, spin off. Figure out Lucasfilm now. From the entertainment industry to the automotive, first quarter profits and revenue for CarMax came in higher than expected. Shares of CarMax up 12% on Friday. How good was this quarter, Ron? It actually wasn't that good. It's a mixed bag. They beat expectations, but the most important part of the business, not firing on all cylinders, if you will, used vehicle unit sales only up 1.6%. Comp store unit sales

down 2.3%. That's by far the most important part of this business. Now, the bottom line was helped by a lower tax rate, which, you know, whose hasn't? So, it made the results look pretty good and it beat expectations. There is a bright side. Conversions were up. So, when you walk into the store, they were able to convert people at a higher rate than previous. And their auto finance unit is doing really well, up 5.7% in terms of income there. And their extended protection plans, which are, let's face it, high margin, those things fall right to the bottom line. We're up 9%. So, it helped to offset the part of the business that you really do, though, need to see improving quarter after quarter. So, don't see the stock

jump and get too excited. Yeah, I think part of this was low expectations. The stock, even after today's pop, is still trading for just about 18X forward earnings. And I think the long-term growth story for CarMax is compelling. As far as Amazon-proof retailers go, you've got to think, CarMax has got to be on that list. And there's just an interesting story here, because the national used car market is very fragmented. So, CarMax has the opportunity to create a national brand around buying and selling used cars. So, from that perspective, I think, looking out over the next five years, I think there's still a lot of growth opportunity here.

I'm going to a CarMax this weekend. So, it sounds like if the protection plans are high margin, maybe I should just go ahead and avoid that. Yeah, maybe avoid that. I've had very good experience there. I never actually purchased or sold anything to them, but the experience was quite good. I'll be interested to see how you do. Well, I've got a 14-year-old minivan that might interest you. That would be their wholesale auction sale unit. They'll sell that for you. Nice. Shares of Winnebago rising 15% this week after a strong third quarter report.

David, are you buying an RV? Thinking about it, a lot of millennials are. The strongest segment for Winnebago and most RV companies today, by far, is the towable units. So, this quarter, towable unit sales up 33%. So, you're not only seeing more and more baby boomers hitting the road and getting into the outdoors, which apparently Ron is definitely not going to be one of those. Not very fond of the outdoorsy guy. Not fond of the outdoors, Ron. I can't believe it.

But in this case, you not only have that tail end of baby boomers buying RVs and hitting the road, but more and more millennials are going for these less expensive total units and hitting the road. And surprisingly enough, even after today's pop, the stock is still down about 20% so far this year, and that's despite overall RV sales by far at all-time record highs. Last year, RV sales, they topped 500,000 units shipped. That number is expected to rise 8% this year. So, still some pessimism in the market when it comes to RVs. Historically, when we think about the retail industry and how the holiday quarter for most retailers is the big quarter for them, is this quarter historically the big

quarter for RV manufacturers? Because it would seem like, hey, we're heading into the summer, that might be a time to get people into an RV. Yeah, this is definitely one of the bigger quarters. And part of the issue here is that we had a longer winter. So, April, which is typically a strong month, you saw a lot of sales, I guess, go to future months, potentially. That's what these companies are hoping. So, it seems like these sales have been picking up. Camping World, which is probably the largest RV retailer in the U.S., they're seeing sales picking up outside of April. So, I think the future still looks bright. Kroger's first quarter profits came in higher than expected. The grocery

chain also racked up some nice online sales growth, and shares of Kroger up 13% this week, Jason. Yes. I feel somewhat validated with the comments I made about a year ago on MarketFoolery when Amazon announced the deal to buy Whole Foods. If you remember that day, I think every single grocery store just ... They got whacked. Yeah, they got whacked, to say the least. Certainly, Kroger was no exception. I was saying back then, though, that was a good example of a knee-jerk reaction when Amazon does anything. And fast forward to today, guess what? Kroger is doing quite well. And if you bought shares of Kroger on that dip, then you're feeling pretty good about yourself

right now. I think there are a number of reasons for that. You mentioned digital sales. Digital sales were up 66% for the quarter. And really, this all goes back to what the company's North Star is. It's this initiative called Restock Kroger, and it's focused on redefining the grocery customer experience. That sounds good, doesn't it? Expanding partnerships to create customer value. I mean, hey, we all love creating value, right? Develop talent and live our purpose. Now, I mean, some of that sounds pretty squishy, but I think, really, they are doing a good job in growing those digital sales. They have really produced a lot of results there with their private brands. They're called Our Brands. And we've seen the success

that Whole Foods has had with their private brands. So, Kroger is seeing that same type of success. Now, all of this said, I still don't think groceries are the most attractive investment opportunity for investors. I think it's more of a value-style investment. You identify when it's undervalued, you sell it when it's fairly overvalued. Kroger is probably at that point now where it's pretty fairly valued. Fire up Doc Brown's DeLorean. Up next, we're going to make a quick visit to a time when Theodore Roosevelt was president. Stay right here.

You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, David Kretzmann, and Ron Gross. You can catch Motley Fool Money every week on Apple Podcasts, Stitcher, Spotify, Google Play. Anywhere you find podcasts, just click the subscribe button.

You can also catch the show on radio stations across America. Two new stations to welcome this week. Money Radio, $1,690 in Denver, Colorado, and Biz Radio, $1,350 in Asheville, North Carolina. Lovering the country. You're welcome. Of the 30 companies that make up the Dow Jones Industrial Average, General Electric had the longest tenure. It was November of 1907 that GE was added to the Dow, and that streak came to an end this week

when GE got kicked out and replaced by, wait for it, Ron, Walgreens Boots Alliance. Similar company. In a million years, I never would have... The fact that GE got booted out with all the struggles they've had, that's not the shock. No, that's clearly not the shock. Walgreens? You know, GE was actually in in the very original 1896, and then was out, and then came back in 1907. 111 years, the end of an era for sure.

That's a hell of a streak. Walgreens is interesting. Clearly, they kind of wanted to up both the retail exposure and the healthcare exposure in the Dow, but it's kind of an innocuous, invisible committee that chooses companies for the Dow. I used to work at Standard & Poor's and knew those folks that did this S&P 500 on that committee. And then S&P and Dow actually combined the index businesses in 2012. So, actually, I know the same guys, but it's a different process. Guys and girls, I should say. It's a different process and it's one that they don't really

tell you much about. They're typically supposed to be large company, well-respected companies. they'll look at the industry and they'll make sure that they don't over-represent industrials or they don't over-represent financials, which are the biggest parts of the Dow right now. So, I wouldn't have picked it, I wouldn't have guessed it, but you could see how some more healthcare-slash-consumer discretionary there at the front of the store makes sense. I just want to know, who else was on the shortlist? Who came in second to Walgreens? Let's see if we can think of any less relevant companies that could possibly be added here. Because the Dow is price-weighted, which, by the way, makes it a relatively

non-relevant index, and professional investors tend to ignore it, you're not going to see companies with very high-priced stocks go in there. So, you're never going to see Amazon and the Dow, you're not going to probably see Berkshire and companies like that. Yeah, really, the only thing the Dow has going for it is that it's been around so long, but I think this just proves, yet again, that they're on a slow and steady race to becoming less relevant. I feel like we've got an ongoing segment here, next week on Dissing the Dow. We're pretty much just killing it. Starbucks management left shareholders with a bitter taste this week. Starbucks lowered

sales guidance, announced it would be slowing the number of store openings, and that they'll be closing 150 company-owned stores next week. And Jason, that is three times the number of stores that they typically close in a year. This is a bad week. Yeah, but Howard Schultz just got out in front of us and said, hey, listen, the stock is undervalued. It's a buying opportunity. Now, he knows one or two things about the business. It's certainly 10% cheaper than it was at the beginning of the week. It is. It is. And it was interesting, I asked a bit of a rhetorical question on Twitter the other day in regard to their loyalty program, because I'm just befuddled by the fact that

they only have 15 million active U.S. rewards card members. I mean, to me, that seems very low. Panera, over a year ago, before they went private, had around 25 million. I mean, listen, I'm one of those donks that just opens my app, goes in and buys the coffee, and I realize every once in a while I get a free one. So, I don't give it a lot of thought. A befuddled donk. But it was interesting to see the responses I got on Twitter. There were a lot of people out there that had a lot of feedback in regard to the rewards program. So, my point was, if I'm Kevin Johnson, I'm looking at that as very low-hanging fruit, and I'm figuring out a way to double that

number from 15 million to 30 million over the coming year. Based on all of the feedback I got from the good folks on Twitter, there are a lot of opportunities I think they have to make that program better. That is an instant traffic driver. I mean, China is always going to be there. Let's not use slowing comps for a quarter as a real reason to sound the alarms. But I really do feel like the rewards program could use some fixing, and that would be an easy one. And I'm not saying that they shouldn't be slowing the store growth, and I'm not saying they shouldn't be closing underperforming stores. But taken altogether, David, this is a bad week. Yeah, not ideal, but still, 150 stores compared to, how many stores? Close to 25,000 or 30,000.

One billion stores they have. I mean, just about. They'll have a store for every person in the world at this rate. So, in the grand scheme of things, it's actually not a huge deal, but obviously for this week, it is painful. But I agree with Jason. I think the mobile app and that whole digital payment experience, that's low-hanging fruit. And when I look at Starbucks today, there are just so many different levers the company can pull. you have ice beverages, food, the premium roastery and reserve brands. So, taken all-in-all, you have a stock now trading for forward P.E. of about 20X. You also have a dividend yield close to 2.5%. So, I look at this as a buying opportunity. I agree with Howard Schultz.

I just want to go on record and say, about 10 years ago, I told my wife that there were too many Starbucks and they would need to close some. So, I just wanted to go on record as saying I was right. You really went out on a limb there, Shares of Darden restaurants up 15% on Thursday. The parent company of Longhorn Steakhouse, The Capitol Grill, Olive Garden, and other restaurant brands. Darden's fourth quarter report impressed Wall Street. And Ron, their guidance for the new fiscal year was pretty strong, true. Pretty good, especially in a time where restaurants are struggling. These results that are mediocre look pretty stellar. You've

We've got adjusted EPS up 17% on an increase of sales of 10%, and blended comps across all of their restaurants up 2.2% with folks like Olive Garden and Capital Grill leading the way. Eddie V's, actually, which a lot of people don't know, is up 3.6%, which is real strong. The one weak place to point to here is their most recent acquisition, which we love the name, Cheddar's Scratch, that they acquired about a year ago for $780 million. Comp sales there were down almost 5%. They've got some work to do there. If they firm that up, then you'll really see the overall results pick up. I didn't look into this, but did you check out how the Olive Garden to-go segment

had done this quarter? I just know that quarter in, quarter out, they've been recording this double-digit growth with Olive Garden to-go. I didn't see any specific metrics in terms of numbers, but comments were really favorable. What about metrics on Italian nachos? We'll go to our in-house expert in just a second. Ron, just in looking at the Darden website and the brands that they have, did you get any sense from this recent quarter of how they're managing it? Because there was a point in time, and I'm thinking primarily of when they came out and said they were going to sell off Red Lobster, that they were struggling with managing multiple brands. They were struggling. Activist investor

Starboard came in, told them to stop salting the water so much, which seems to be the big catalyst there. But clearly, they needed to get their act together. They did sell it for lobster, but then they went ahead and acquired cheddar. So, it appears that they're not afraid to have a diversified portfolio. And so far, at least on a blended basis, it's working out. Let's go to our man behind the glass, Steve Broido. Steve, any comment on the to-go question that Jason raised? You know, I've never used it. It sounds like an exciting opportunity for potentially this weekend. Here's another opportunity. Looking at the Olive Garden website, they're promoting

something called Create Your Own Lasagna. Have you taken advantage of that? And do you have any recommendations on what we should do when creating our own lasagna? I have not, and I wouldn't even know where to start. That sounds so complicated to me. What would you create? I don't know, maybe it's like, create your own pizza? It's just layers, Steve. I mean, pasta, layer, pasta, layer. Just figure out what you want in the middle. Get some cheese in there. Alright, guys, we'll see you a little bit later in the show. Up next, a conversation with Michael Batnick about his new book,

Big Mistakes, The Best Investors and Their Worst Investments. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Even the most successful investors make investments that, well, go south. Michael Batnick is the director of research at Ritholtz Wealth Management, and he's the author of the new book, Big Mistakes, The Best Investors and Their Worst Investments. And he joins me now from New York. Michael, thanks for being here. Thanks for having me on. So there are a lot of books that celebrate investors and their success. What got you

interested in writing about their mistakes? Yeah, as you just mentioned, there are a million books on how Buffett did what he did. There's the little book that beats the market. I mean, there's a million how-to books. So I wanted to go the opposite way. And this is not a how-not-to book, but I just wanted to shine light on the fact that, hey, we're all human, we all make mistakes, and the best investors have taken their mistakes in stride and turned their experience into expertise.

Is there a common thread that you profile a number of investors in the book? Is there a common thread that sort of runs through them? Yeah, there is. So the majority of the mistakes that were made in this book were not failures in the spreadsheet. It was not an aggressive growth rate that they didn't reach or an inappropriate discount rate. It was a failure to prepare for a lousy outcome. And a lot of this was just self-inflicted errors. It's surprising because, I mean, we're talking about, and we'll get into a few of the individuals here,

but we are talking about some of the giants of the investing world who are known not just for their investment acumen, but also for, I don't know, sort of grace under pressure, it seems like. Well, Benjamin Graham literally wrote the book, whether it's Security Analysis or The Intelligent Investor, like the book on fundamental investing, and he lost 70% during the Great Depression in his fund. So, yes, to your point, nobody is immune from this. All right, let's start with some of the people in your book. And the first one I'm going to ask you about surprised me because it's Mark Twain. I mean, the highest-paid writer of his day.

I didn't really know that he loved investing, but he definitely had some investments that went bad. What's the story with him? Yeah, he was actually a junkie. He could not control himself. He put money into everything. He was a sucker for a good story, was enamored with entrepreneurs. And the thing that really cost him big was he couldn't admit that, you know what, I'm done putting money into this last investment. And the thing that sunk him was something called a typesetter.

I guess it was like a modern typewriter, basically, that just didn't work. And he put so much money into it. And he was forced to do a round-the-world stand-up comedy tour to pay his debts. That's incredible. I mean, in a way, that reminds me of you hear the horror stories of how singers or musical acts get taken advantage of early in their careers, and they get in debt. And basically the only way they can pay it off is just by constant touring. Yeah, he was sort of the opposite of that because they didn't play on him. He went and he sought it.

And it's sort of funny, like, to pour salt on the wound. He passed him the telephone, and basically everything that he touched turned to junk. Let's move on to Jack Bogle, founder of the Index Fund, founder of Vanguard. I mean, look, if there's a Mount Rushmore of investing, Jack Bogle is on it. It's hard for me to fathom him making a big mistake. Yes, well, he certainly did. He felt he was poisoned by the fear of missing out, as was Stanley Druckenmiller and a lot of great investors. So in the late 1960s, as the go-go years were taking full swing and turnover was the name of the game,

the Wellington Fund, which was known for its conservative background, did a complete 180. And they brought in some hot shots up from Boston, and they ran a fund that was based on technical analysis, and their results suffered big time. And that was probably the biggest regret that he has in his career. Where is Warren Buffett in all of this? So Warren Buffett, none of us will ever have. So the mistakes that I highlighted, these were not specific. You know, don't do this.

None of us are going to have the opportunity to buy a stock with the stock in our own company. So that's not the point. So Warren Buffett paid for Dexter Shoe Company with the stock in Berkshire. At the time, it was $433 million. Today, that's worth $7 billion. But the point was he was just way too overconfident with that approach. And if Warren Buffett tends to come to overconfidence, I think the key lesson that investors should learn from all of these lessons is be careful evaluating your own talents objectively and the limitations to what we can realistically achieve. Going a little bit younger, Chris Sacca, who some of our listeners may know.

I mean, Chris Sacca is certainly on the list of among the more successful VC investors. He was an early investor in Twitter. and Uber. Where did Chris Sackett go wrong? So allegedly, at least this is what he said, that he had the most successful VC fund of all time. But he passed on a lot of big winners. He said no to Snapchat, Dropbox, and Airbnb. And it's not like he missed them, but they came to him and he said, thanks, but no thanks. And the point of that chapter was that there is always going to be something that we pass on or something that we sell too early, whether it's missing Bitcoin last year or whatever it is, like that's just the nature of the market. There's always

something leaving the station without us. It seems like at least part of the trick, because again, these are in the investing world, these are very successful people, but it seems like at least part of it is just figuring out a way to get over it. Did you run into any sort of common coping mechanism that these investors have? Because it's kind of like a relief pitcher in baseball who gives up a home run and loses the game. You can't really dwell on that mistake. You've got to come back for the next game. Is there a way that, whether it's Chris Sacker or Buffett or Munger or any of these people, how do they get over these? Because we're talking about many zeros involved in the amount of money being lost here. Yeah, you know, it's

interesting a lot of people well so just one thing before i get into that is that there are so many different styles of investing that one person's mistake can be another person's discipline right if you if you try it if you're just a buy and hold index type person um sitting through a 25 drawdown is required at some point in time but to another person sitting through a 25 drawdown that looks like complacency and something they would never do so there's a million different mistakes to make but in terms of getting to the question you asked which was how did they cope um a lot of a lot of actually i think about a lot of these investors were not able to cope with it because for instance uh stanley drunkenmiller left soros after his big mistake um michael

steinhardt shut his fund down in 1995 after his big mistake john paulson uh has been a disaster since his big mistake um so not all of them were able to come out the other side and i think that the important thing for the average investor is not putting yourself in a position to make a big mistake. You know, if you play around with 5% of your portfolio, whatever it is, and you're trading stocks, and if you, you know, go south, that's fine. But avoiding the big mistakes, the ones that you can't mentally come back from, that's really, really important to state the obvious. I mentioned that I was surprised to see Mark Twain in this book. Here's another thing that surprised me that you wrote, and I just want to quote from earlier in your book. You wrote,

great investors come and go, and most of the ones featured in this book will be lost on future generations. But if I had to put my money on one name that will stand the test of time, it's Benjamin Graham. What is it in your mind about Benjamin Graham that separates him from everyone else? I think probably just that he was the first. And I think that, like for me, the first thing that I did was I went to a library and I looked up a book and the intelligent investor fell into my lap. And I think that that's probably always going to be the starting point for people. Well, now when I first read it, it went completely over my head. But the part about Mr. Market, that was plain English that I could understand,

the manic highs and lows. So I don't think that it's necessary that Benjamin Graham is the greatest investor of all time or anything like that. I just think that because he was first, I think he'll be around for a long time. You're a professional investor. What's been among your bigger mistakes, and what did you learn from it? So I haven't had any big investing losses. I guess, conversely, I haven't really had many big gains either.

But the thing that I did, and the reason why I was able to discover so early on why I wasn't destined to be the next Paul Tudor Jones is because I kept a diary. And I would write down all of the reasons and the thesis, and I'm using quotes because there wasn't much going on. And then I would come back to it. And you can only fool yourself for so long, right? If your thoughts aren't righting and you're going back and you're reviewing it and it just sounds more and more and more ridiculous, it's like, hey, wait a minute. This isn't working.

So it took me about two years before I said, you know what? I respect the market. It's probably one of the toughest opponents in the entire world. Not many people beat it. And I said, you know what? I don't need to beat the market. My goals in life are bigger than beating the S&P 500. So I stopped playing.

You're the director of research at the firm that you work at. When we're researching stocks as individual investors, what is one tip to help us improve? Maybe it's something we should be paying more attention to or less attention to, or maybe it's something we should be ignoring altogether. Okay, so here's a tip, maybe not directly related to the PE ratio or the growth or anything like that, but just slow down and think about your competition. think about who you might be buying from or selling to. And I think that that's lost on a lot of people.

Like, you would never line up against Tom Brady or go on the basketball court with LeBron James, but you would think nothing of trading stocks with run-of-the-mill technologies because you're not seeing them. So just think about who the other person or computer, for that matter, on the other side of the trade is.

Last question, then I'll let you go. What do you know now about writing a book that you didn't know when you started? Well, that's a good question. You know, there were no big surprises. I knew it was going to be a lot of work. It took me over a year. So no curveballs.

I would just, yeah, no curveballs. It was as difficult as I expected it to be. The book is Big Mistakes, The Best Investors and Their Worst Investments. It's currently number one on Amazon's list of investing books. So, it's Michael Batnick's first book, but if I'm his publisher, I'm pretty sure it's not going to be his last. Michael, thanks so much for making the time.

Thank you, Chris. Really appreciate you having me on. Up next, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money. Hey, before we get to the stocks on our radar this week, quick shout-out to Rocket Mortgage. If you're getting a mortgage or you're thinking about refinancing your existing home loan, these are not easy things. It is not a walk in the park. And when you're doing something big like that in the financial space, you want to be as

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NMLSconsumeraccess.org, number 3030. 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 full money. Chris Hill here in studio once again with Jason Moser, David Kretzmann, and Ron Gross. Chipotle is testing out some new menu items. On Thursday, Chipotle announced it is adding five new menu items to its test kitchen in New York City. Among the items are quesadillas, chocolate milkshake, and avocado tostadas, which I have to believe, guys, is aimed at David Kretzmann's generation. I mean, that's avocado toast. You millennials are all about

that. That's gold for Instagram, Chris. That's what we're all about. They're also looking at nachos. And yeah, like you mentioned, this is just a small test in their New York City test kitchen, potentially rolling out regionally, and then nationally, they'll keep tweaking the recipes. And the big challenge here, which CEO Brian Nicol addressed, is they need to find the right process to fit this into their existing assembly line without slowing throughput and just building up the line as people wait for their food. And that's the thing. I look at this list, I think, with Chipotle, with any sort of fast, casual restaurant, they're focused on that throughput. How many people can we get through the line as quickly as possible? These are

items that take a little bit more time, and in some cases, they require new equipment. Yeah, for sure. There'll be definitely some capital expenditures associated if they roll it out wide. They have to balance the menu getting boring with the throughput taking a hit. And there is a balance there. My concern is, if you recall, the queso does not have stabilizers. So, to create nachos without stabilizers, I mean, it's chaos. I think Ron's right about that. Chipotle has been rolling out a kitchen in the back of the restaurants. I would suspect some of these more complicated items that might stick back there really encourage people to order ahead on the website or through the app, so that way you're

not disrupting that line of people in the stores themselves. And something else that Brian Nichol mention is that they'll be rolling out one or two promotional items during the year, so more like one-time items that they launch for a few weeks, similar to Taco Bell, where you came from. You can follow Motley Fool Money on Twitter. Our handle is at MotleyFoolMoney. You can also submit questions, as Daniel Alvarez did when he asked on Twitter, guys, your first $500 to invest, what stock or stocks are you buying today? Jason sounds like we've got a new investor on our hands. Let's just go ahead and assume, and we don't know, but that's

why we'll assume. We'll assume that Daniel maybe has a 401 . He's already got the box checked in terms of the low-cost S&P 500 index fund, in terms of individual stocks for someone starting out. Yeah, I got to point to the war on cash here, Chris. I want to look for something that is going to still be very relevant 10 years from now. And I think, to me, the payment space, that money still has to travel from point A to point B. So, I'm looking at companies like Square or PayPal as the companies that are going to help shape this space over the coming decade. I'll give some more generalized advice. I would buy one stock with $500, not a bunch of stocks, and I would make it a company you

truly love, perhaps you're already a customer, but one you really would be proud to own, proud to watch, and maybe you're going to end up owning this for 10 or 20 years. One stock that is just really one of your favorite companies. Yeah, and I would say, start with companies that you understand and are easy to follow. So, a few stocks that I like that I think fit the bill, Starbucks, which we mentioned earlier, I think a compelling price today. Facebook, everyone knows Facebook. And then, I'm going to throw out a little bit of a wild card, National Beverage, the company behind LaCroix Sparkling Water, I think three solid companies to look at.

And a solid ticker symbol. Fizz, F-I-Z-Z, yes, sir. Yeah, I would just echo that last point by David, which is, in my experience as an investor, the more I understand the business, the easier I sleep at night. Let's get to the stocks on our radar this week. And our man behind the glass, Steve Broido, is going to hit you with a question. Ron Gross, you're up first. What are you looking at this week? I've got another great ticker symbol for you, that's LOVE, L-U-V. Southwest Airlines, largest U.S. airline, flying 120 million customers a year. Strong balance sheet, unmatched record of profitability, high returns on invested capital, great free cash flow, recently increased

their dividend by 28%. Stock is not necessarily cheap relative to its peers, but it is trading at a discount to its historical average. And it always does trade higher than the competition. And quite frankly, that's because it deserves to. It's a much better run airline, really the only major that's never declared bankruptcy. Steve, question about Southwest Airlines? Do you think, I like flying Southwest Airlines. Why is it so difficult for Southwest Airlines tickets to be sold on places like Expedia. I don't think you can buy Southwest tickets on Expedia. Why is that so hard? I don't have a direct answer. I think it's because they want to drive people directly

to their website rather than third-party websites, and they can control the process a little bit better. Isn't JetBlue the same way? They used to be. I don't think they are anymore. Jason Moser, you're up. Sure. A new one here, iRhythm Technologies, ticker is IRTC. A little tip of the cap to a Twitter follower of ours, Phyllis Schuster, who actually shot this out there on my radar earlier in the week. It's a healthcare company focused on cardiac arrhythmias. Their main

offering is a system called Xeo, which is a biometric patch, a data-collecting system for patients at risk of atrial fibrillation, which is just fancy talk for irregular heartbeat. AF affects as many as 6 million patients in the U.S., 35 million or so patients worldwide. wide. This is an FDA-approved platform. I'm digging in this to find out if it's a business-worthy of investment dollars. Thus far, I'm compelled to keep looking. Steve, question about iRhythm Technologies? Do you know if insurance companies are bought into this technology at this point? That is a very good question. Because it's FDA-approved, they are. And it's worth

noting that most of their money is levered to collections from insurance companies, government agencies such as Medicare, Medicaid, etc. David Kretzmann, what are you looking at? This was a big week up in Canada. Canada officially announced that October 17th will be the date that legalized adult use recreational cannabis will be available in the country. So Canada is going full legal. This will be the first major G7 nation to embrace legal recreational marijuana use. So there's no question in my mind that a legit industry is forming here.

We're still in the very early stages. But once we cross October 17th, I think we'll begin to see which companies are walking the walk and actually forming a sustainable business model here. So, I think a company worth watching here is the top dog in this space. That's Canopy Growth, ticker CGC. That's not a buy recommendation at all, but I think it's a company worth watching just as we start to pay closer attention to this space. And by the way, up north, Motley Fool Canada is launching our first ever cannabis investing recommendation service.

So, if you're interested in that, go to fool.ca slash marijuana moment. Steve, question about canopy growth? Do you see legalized marijuana hitting the lower 48 anytime soon? Across, I know in certain states, but across the country? Yeah, I mean, even Trump has said that he would support a bill that would decriminalize marijuana on a federal level, so I think it's a matter of when, not if. Steve, you got a stock you want to add to your watch list?

I'm going LUV. Baby. All right, Ryan Gross, Jason Moser, David Kretzmann. Guys, thanks for being here. Thank you. Keep the questions coming. you can always email us, radioatfool.com is our email address. That's radioatfool.com. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Steve

Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.