Motley Fool Hidden Gems Investing - We Have Lyft-Off!

Episode Date: March 30, 2019

Lyft rises in its public markets debut. Wells Fargo makes a change at the top. Lululemon hits a new high. Analysts Aaron Bush, Ron Gross, and Jason Moser discuss those stories and dig into the latest from McCormick, Blackberry, and Restoration Hardware, as well as surprising e-commerce news. Plus, Motley Fool media analyst Tim Beyers reviews Apple’s big event and discusses Google, Microsoft, and the future of gaming. Check out Hello Monday from LinkedIn Learn more about your ad choices. Visit megaphone.fm/adchoices

This week's Motley Fool Money is brought to you by TD Ameritrade. Investing lesson number one, don't pay for lessons. TD Ameritrade's education is free. Choose from articles, videos, webcasts, and more. Everything you need to take your trading to the next level, visit tdameritrade.com slash education member SIPC. Also this week, we're brought to you by Hello Monday from LinkedIn. Hello Monday is a new podcast from LinkedIn's editorial team about how to get the most from

Monday and your career. And you can find Hello Monday on Apple Podcasts or wherever you listen to podcasts. Everybody needs money. That's why they call it money. 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 Analyst Jason Moser, Aaron Bush, and Ron Gross. Good to see you as always, gentlemen. Hey, how are you doing? We've got the latest headlines from Wall Street. We'll get an update on the battle for the living room.

And as always, we'll give you an inside look at the stocks on our radar. But we begin with the latest IPO. Lyft went public Friday morning at a price of $72 a share. The stock immediately shot up 20% before settling in the mid-80s. Aaron Bush, I'll start with you. Can I interest you in a share of Lyft? I am interested, although I do have some hesitations. I have a lot of respect for Lyft to get to this point. A couple of years ago, when I was starting to study the ride-sharing space,

I was genuinely worried about their ability to capture market share at a reasonable cost, because Uber was just so dominant. And really, they got lucky with Uber stumbles, their cultural problems, executive turnovers. And Lyft executed beautifully in Uber's turmoil. They really seized the moment, built their brand, captured market share, and that captured market share seems to be permanent. And when I look at the business today, I think I like it more than I don't, but it's definitely nowhere close to perfect. The company is growing quickly, and the market that they operate in is massive, and it's only going to become much bigger. But their growth rates on both their riders and their

rides taken are very clearly slowing. And that isn't necessarily a deal breaker, but it puts more pressure on their ability to make more money per ride. And that is their take rate and essentially determines how much money does Lyft make versus how much money the driver makes. And that rate has doubled over the past three years to about 29%, which is good for them, not as good for the drivers, but I don't know how much higher that can go. And so I think what determines Lyft's future from here really is their ability to maintain their market share, but also grow in other areas. Can they do something with food, like Uber Eats has done? They have a partnership with Waymo for self-driving cars. What does that mean? Can

they actually make that become worth something? They're burning a lot of cash, which adds risk, but it's big business. And I do think over a long period of time, they can become much bigger. It's interesting that Aaron's talked about diversifying into other areas, because some of the analysts I've seen like the fact that Lyft is a little bit more focused, or a lot more focused than Uber, where Uber is into Uber Freight and short-hop air travel, Uber Air, driverless taxis, lots of other things. Lyft, a little bit more of a pure play, obviously a smaller company. So, it's interesting. We'll see which way they go. $25 billion valuation at this current price around there, not profitable. Hard for a value guy like

me to sink my teeth into that. Let's assume they will one day be cash flow positive. They're targeting 20% EBITDA margins. That's probably aggressive, and they've given no time frame. So, it's hard to really put a proper value here. For me, I like the company, but it's kind of like Coke and Pepsi to me. I only drink Pepsi if the restaurant doesn't have Coke, and I only kind of take Lyft if they send me an email giving me 10% discount on my next 10 rides or something like that. Yeah, I mean, I like the opportunity that both of these businesses provide. I mean, I think it's going to really boil down to, like Aaron was saying, leveraging those networks into other things. I mean, take that network and beyond just ride-sharing and getting people from point A to

point B, getting food from point A to point B, getting things from point A to point B, and whatever else they may be able to dream up. I think the self-driving car market is something I think we probably all hope for at some point. I'd love to be able to just give my daughters in Uber or Lyft car and not have to worry about them driving. You know, the expenses involved with it, along with just worrying every day that they're driving on the roads up here. But, yeah, I mean, from an investment perspective, I mean, I think you have to look at this and say, well, you might be interested, and I am. I mean, this is a business that's going to be valued, basically, on an adjusted EBITDA metric for the next five years, at

least. If not more, yeah, maybe forever. I'd be willing to bet dollars to donuts that we will see this share price significantly lower than it is today. And maybe that's when you want to take a look. But congratulations to them for what looks like a successful IPO. And I do think it's good for IPOs in general. This generates excitement, it leads to other companies wanting to access the public markets, which I think is good for investors. Well, and it's nice that the stock, they obviously priced it fairly well. I mean, with a 15%, 20% pop, it's not like they left a lot of money on the table. And you saw that they upped the price right before the IPO as well. So, it looks like, all in all, it was well done.

And we'll have more IPOs coming later this year, Uber, Pinterest, Airbnb. Real quick, around the table, is there a company going public in 2019 that you're particularly interested in? Yeah, I'll kick it off. I think Zoom is really interesting. It's the best S1 that I've read, probably in my time here being at The Fool. Their growth is unbelievable. This is the company that really is taking enterprises by storm with their video conferencing systems, which sounds like a very competitive playing field, but they figured out a way to just dominate. So, very interested. Yeah, I think one that I probably wasn't going to give a whole lot of credit to, but now I'm a bit more interested, is Pinterest. And based on just the nature of visual search,

and that's really where their strength lies, 97% of the 1,000 most popular searches on Pinterest are unbranded. And generally, when you look at all of these social platforms, when it comes to e-commerce. Pinterest is the one, by far and away, that promotes more buying behavior than any of the other ones. And just anecdotally, while I never thought I would have ever considered using it, my dad, 76-year-old doctor, like a few months back, showed me this little hack. He goes there all the time on Pinterest to look at different watercolor demos and folks putting up their paintings up there to learn new tricks of the trade and whatnot. So, I actually started using Pinterest to help in my watercolor efforts. Which are quite impressive.

Well, thank you. I mean, but it's very clever. It works very well. And so, yeah, as a user, I can certainly see the benefit there, closing in on $1 billion in sales. So, they're doing something right. Just to be clear, your dad's getting tips on painting, not surgery, right? Painting, not surgery. Just wanted to clarify that. I don't really have one that I'm looking at. But this morning, when Aaron said Zoom was the best S-1 he's read in quite some time. I said, I got to take a look, and I did. I went and took a look, and I completely agree. It's a very impressive company with great growth in the past and what looks like ahead. And so, that's going to be an interesting one.

Big hurdle, I can't get past this, man. Another Zoom? I mean, am I going to get screwed out of this one? They spell it a little different. Yeah, but it sounds the same, and I'm still not over it. Clearly. Wells Fargo, back in the spotlight this week, as CEO Tim Sloan resigned, effective immediately Sloan was installed as CEO in October of 2016 to clean up the mess caused by the scandal involving millions of fake accounts. Jason, I don't want to pat us on the back, but it

feels like, when I think about that point in time, we were all sitting around this table saying, wait a minute, Sloan's been at Wells Fargo for a long time. Is he really the person to clean up the mess that he probably had a hand in helping to cause? I mean, I'll pat you on the back if you want. I feel like you're right. We've talked about this for a long time. It is kind of astounding that it ultimately came to this, but here we are. And, you know, where I grew up, we call this going around your rear end to get to your elbow. It seems to be the most inefficient way to get from point A to point B, so to speak. Listen, I mean, he should have never been promoted to CEO, in my opinion, because he was

part of that executive team that was culpable in all of these crises. And it's not a crisis, it's crises. I mean, there are some big problems that they still have to figure out. And so, the board, whomever was in charge of ultimately assigning him that CEO role, they automatically put themselves in a position where they had to be defensive. They had to get out there and justify why they would give this hire to an internal candidate. If you bring in someone externally, then it's really easy to spin the narrative that you're trying to change the culture of the company. So, I feel like they could have just made that leap from the very beginning. They didn't. Obviously, they're going to do it now. A lot of qualified candidates out

there, I imagine, they'll have this resolved pretty quickly, but then it's going to be up to that new CEO to really spin this story in a new direction and get over all of these problems they've been having. Shares of Lululemon Athletica hitting an all-time high this week after a strong fourth quarter report. And, Ron, equally strong guidance for 2019, too. This company just keeps rolling along, really impressive. Revenue up 26%, with comp sales up 17%. Their in-store channel comp sales were up 7%, direct-to-consumer up 39%. Turns out, the China market loves their athleisure, because online sales there were up 140% during the quarter. They're doing a great job with cost controls, which led to margin increases, and therefore, adjusted

earnings per share were up 39%. The company continues to really, really execute. As you mentioned, guidance was very, very strong as well. The stock's trading at 36X that guidance, so it's not a cheap company, cheap in quotes, but they're putting up great growth, so maybe it is actually reasonable. Why do you think they've been able to succeed in an area that really should have more competition? Five years ago on this show, were talking about Nike and Under Armour getting into the yoga wear space and saying, look, they make quality stuff at Nike and Under Armour, this may be trouble for Lululemon, and it really hasn't been. You know, these specialty retailers,

it always comes down to their merchandising and their buyers and putting the proper product into the stores, and they consistently do that well. They get rid of the stuff that isn't going well, when they need to be promotional, they are, but they're constantly putting stuff in the store that people come back for. BlackBerry, the business that once dominated the mobile phone market, is trying to rise from the ashes as a communications software company. Fourth quarter results were good enough to push shares of BlackBerry 10% higher on Friday. Aaron? Yeah, BlackBerry has had quite the transformation over the past decade. And even if you look

at their growth and their profitability, and it looks pretty tepid. Underneath that, their software business is really taking off. BlackBerry's expertise has always been around endpoint security, first with their phones, and then they've taken that same expertise to software to cover lots of different devices. They cover the Internet of Things. They help enterprises secure all their various different devices. They play a role in car security now, which is interesting. So, there is a market for their software. But one other side effect of a long technical history and wide-ranging areas is that BlackBerry has also built a pretty robust and valuable patent portfolio. And what surprised investors, I think, this quarter is that their

licensing business jumped 71% to nearly $100 million, becoming the largest revenue segment of this quarter. And when that type of hidden growth that people weren't really paying attention to much before starts to become more meaningful, the market starts paying attention. And I think that's what's going on today. Coming up, the industry that you were not aware of is worth more than you could possibly imagine. Stay right here. This is Motley Fool Money. This week's Motley Fool Money is brought to you by TD Ameritrade, where they are working hard to reinvent how you invest. Now you can place trades, learn new investing concepts,

and get real-time stock quotes by sending a message on Facebook or Twitter. Plus, you can keep track of the market with just your voice by enabling the TD Ameritrade skill for Amazon Alexa. Learn more about what they're doing to bring the market to you at tdameritrade.com slash innovation. Member SIPC. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Aaron Bush, and Ron Gross. First quarter revenue for McCormick was just 1% higher than a year ago,

but adjusted earnings were just spicy enough to push shares of McCormick higher this week. What do you think, Jason? Well, I mean, let's go excluding currency effects. It was 4% top-line growth, Chris. So, let's just give them what we can here, I think. Remember back in January on the show, we were talking about the stock getting hammered on earnings. There are some concerns about 2019 guidance, and the stock fell down towards the $120 range. I mean, I was saying then, I thought it was a gift for people who could take the long review. And lo and behold, here we are now, the stock is back up, knocking on $150. And I think a lot of that is because of the reliability of the business. It's not lighting the world on fire

with its top-line growth, but it's able to continue growing, and it's able to continue bringing those savings down to the bottom line with this Arby Foods acquisition that gave them more share globally in the sauces market. Interestingly enough, we talked a little while about how at some point or another, this business was more than likely going to start looking at another acquisition to make at some point. The Arby Foods was a big one. It seems like they've integrated that nicely. It's working out well. And management on the call did note that it's time to start looking for a new deal. So, they're going to continue paying down the debt from the Arby Foods acquisition. They're not going to be buying back shares. Very refreshing

to see that. They are a dividend aristocrat, so expect another dividend raise at some point this year. And I imagine at some point this year, we may find out of another deal that they're looking to make. So, all in all, the business continues to perform well. I'm a happy shareholder, and I think anyone out there who owns shares, hang on to them. It's a good long-term story. Is it safe to assume that whatever the acquisition they make is, that it's going to be right in their wheelhouse? They're not going to do what, obviously, Pepsi is a much bigger company, but you look at Pepsi with Frito-Lay, where they've got beverages, they've

got snacks. McCormick's not looking to break out of the spice category, are they? No, I don't think we'd be seeing them buying a furniture company anytime soon. It is going to be in their wheelhouse of spices, flavors, sauces, things like that. I hope it's not bottled water, though. There's enough of bottled water out there. I think the Arby Foods acquisition was a good example of a direction they're willing to take it. As silly as this may sound, sauces, that's a bit of a different market than those dry spices. It requires a little bit of a different production mentality. But they've shown that they're obviously willing to go in that direction,

so I suspect they'll keep all options on the table. Fourth quarter results for Restoration Hardware looked good, but the retailer cut guidance for the full fiscal year. and shares of Restoration Hardware down nearly 20% on Friday. Ron, how bad was this? It wasn't that bad. I think it's a bit of an overreaction. The company has done a wonderful job over the last two or three years turning their business model and changing things around.

Here, still, the quarter was really strong with comp sales up 5%, revenue flat, but that's because there was an extra week last year in the numbers. If we adjust for that, revenue is actually up 7%. Nice expense controls, adjusted net income up 75%. So, the quarter in and of itself was very, very strong. Now, conditions did start to deteriorate near the holiday season. They're citing some weak real estate markets, which kind of affects this business. So, they brought down guidance.

I think 20% is a big overreaction. I think the company is doing really well. The numbers still look strong. Could be a good opportunity to actually pick up some shares. But this is one of those businesses that potentially has some ripple effects in terms of the high-end housing market, yes? Well, the high-end housing market has ripple effects on lots of other businesses, yes, for sure. And this will have some cyclicality. Again, a specialty retailer with a big real estate having a big impact on it, it will ebb and flow.

But as long as they have their strategy together, their new loyalty program, they have merchandise in the stores that people want, even when the cycle is weak, you'll eventually get a rebound. The ability to shop online means you can buy just about anything you want without leaving your home. But, as Uncle Ben Parker warned his nephew Peter, with great power comes great responsibility. An online survey of nearly 2,200 alcohol-consuming Americans found that nearly 80% of them have made at least one purchase while drunk, with an average annual spend of more than $400 per person. Courtesy of The Hustle, the online site conducting the survey, a little

back-of-the-envelope math puts the drunk shopping industry at $45 billion, the most common purchases being clothing, shoes, movies, and games. And I have to say, guys, as an Amazon shareholder, I was very happy to see that, overwhelmingly, drunk shopping is being done on Amazon. They should put in a fail-safe, like, are you sure? Have you been drinking? Click both buttons before this transaction goes through. As a shareholder, I'm completely against that. I would imagine this is a real boost to holiday sales, right? I mean, that's the time where we tend to imbibe, and you just have to buy gifts for everyone.

So, you did, hey, throw that extra green machine in there, or whatever you may buy. I mean, you can always figure out a way to justify it. Yeah, I think Amazon should totally lean into this. You see that they're white labeling and ripping off tons of other different products. They should start white labeling their own beers, their own wines, and the labels have ads and QR codes. That could double that $45 billion. In all seriousness, if you're any online retailer, shouldn't you be taking this information and doing something with it? Shouldn't you be saying, look, we're going to start having flash sales Friday night starting at 9 o'clock?

Of clothing and shoes. I think you need to do that. And I think even more so, you look at companies like, you look at Instagram and you look at Pinterest, another one, for example, where consumer behavior could be guided in that direction. People are surfing those sites all times of day. I mean, I could see them particularly using this as a way to juice that commerce. All right, guys, we'll see you later in the show. So Apple held an event to unveil their latest service offerings. We will discuss that and more with our man, Tim Byers.

That's next. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. On the line is Tim Byers. He analyzes the media and entertainment industries for The Motley Fool, and he joins me from Colorado. Tim, thanks for being here. Thanks for having me, Chris. How are you doing?

I'm doing well. Let's start with the big event that Apple had earlier in the week. A lot of different parts to it. What's your headline for the event itself? Apple wins incrementally. Wow, that's sexy. Yep. I mean, the sex is gone with Apple. And that may or may not be a bad thing. It depends on how you view Apple as an investment. The way I view it is as a company that's defining consumer trends but is no longer the innovator that we once thought it was.

They're just not spending on R&D. They're not innovating the way they were. Tim Cook disputes this, by the way, but I think the numbers speak for themselves here. The amount of money Apple makes compared to the amount that it invests in research and development is paltry. It's always been that way. They just used to be able to do much more with their R&D dollars, and they're just not doing that anymore. So everything you saw at that Apple event was incremental. News Plus, Apple TV Plus.

It is just the only thing we're really seeing from Apple right now is an expansion of the existing ecosystem, not something that is a breakthrough product. And I think that's the way Cook wants it for now, but that's only going to last so long. It's interesting because the video piece of what Apple announced got a lot of attention, and probably rightly so when you consider the track record of people like Oprah Winfrey and Steven Spielberg. The more I thought about it, the more I thought that's actually less interesting to me, not just as a consumer, but also just as an investor. it seems like the credit card in some ways might have the most potential, at least in the near

term. I think in the long term as well. The reason why is because it actually solves a pain problem. As an investor, what I want to see is who is giving me medicine for the migraine I'm experiencing in this area. In the area of entertainment, it was Netflix that had the aspirin for the migraine of video streaming. And they are still the number one leading brand on the shelves. And for good reason. Their original content is memorable. It is an open question as to whether or not Apple can make memorable streaming content. But the Apple card is very different. And so I agree with you on this. It's more secure. There are no numbers on it. You don't have to sign it. There are some digital tools. The language is clear. It's supposed to take some

of the pain out of using and managing a credit card. That is very useful. Now, is it a major innovation? No. But this is the kind of thing that Apple does very, very well, where they take an existing process and they make it a lot better. So we had smartphones, for example, before Apple, before the iPhone, but they weren't as good as the iPhone. It's not just that the iPhone was cool, it's very functional. You know, the single button, the touchscreen was very, very useful, and it was built in a very user-friendly way. This may be, I mean, this probably sounds trite, but this may be the most user-friendly credit card. I don't think it's going to be the best credit card, but it might be the most user-friendly, and that gets it some adoption.

Well, and it's also, when you consider the fact that they are producing actual credit cards to go along with this credit card system built into the phone, it's also an acknowledgment by Tim Cook and his team that Apple Pay, for all of its success, did not become as ubiquitous as they wanted. They had to produce this card because there are places, lots of places, that just don't take Apple Pay. Right. There are lots of places that do, but lots of places that don't. And so if you want to have and let's be honest here, you know, we talk a lot about the cashless society. We talk a lot about payment systems, electronic payment processing, e-commerce. And the city of Philadelphia says, nope, we don't want cashless payments. So, I mean, we're a long way from getting to the point where Apple Pay can be a ubiquitous system, even at the level of legislatures, which say they're not ready for this yet. So in order to change habits, you have to reduce objections.

And this is a very easy way, I think, for Apple to reduce objections to Apple Pay and increase the usefulness of that ecosystem that Cook speaks so highly of. Last time you were on the show, one of the things we talked about was YouTube. I know you're a fan, not just of YouTube, but also sort of the potential of YouTube. Bloomberg reported this week that YouTube has canceled two of its biggest original series, and YouTube pretty quickly issued an official denial that they're backing away from original content. but that really doesn't seem to square with the canceling of these shows. Does this change your thinking on YouTube at all? No, that should be a non-news event. Of course that's going to happen. Shows get canceled all the time. Yes, they were two of the biggest shows.

That's true. If you thought that this was the end of YouTube original content, you weren't paying attention. So I personally think that YouTube is going to make its money on very short clips, 15 minutes or less, probably five minutes or less. It's that repeating content. You give me five minutes of this, here's my related content, and then I will, you know, keep going and going and going until I've spent an hour, but I've watched 10 things. That really is the future of YouTube. And because it's broken up into those kinds of segments, there can be lots of different, very personalized advertising in there, and it can be very different.

That allows for a very different monetization model than what you have on linear television. So I very much believe in the YouTube model. Original content is not as important for YouTube. Remember this. YouTube was built on content that other people made, and it was built on video gamers streaming themselves playing video games. And that ultimately became a massive business called Twitch that Amazon acquired. So there are lots of different ways that YouTube monetizes and lots of different programming that plays extremely, extremely well. YouTube doesn't have to invest in a big amount of original content on its own in order to win. That's very different than what is required of Apple or Netflix or Amazon Prime or even Hulu.

But it seems like, unlike those services you just mentioned, which are more established when it comes to original content, when it comes to sort of professionally produced content, it does seem like there seems to be an internal struggle at YouTube. And I don't have any inside information, but the way it plays to the outside world is, within YouTube, it wouldn't surprise me at all if there was a group saying, this is a mistake, we need to invest even more money in original content, and others saying, no, we need to drop this altogether and just go with ad-supported businesses as a model. And it's almost like YouTube is still trying to decide what it wants to be. when it grows up i will go further than that and say i guarantee that that is happening 100 guarantee that that is happening because youtube still has a limited identity in this world it's

not that they have a limited presence they just have a limited identity people don't exactly know how to use youtube as part of their entertainment lineup except for watching clips or listening to music and watching music videos. Other than that, YouTube doesn't have much of an identity. So I guarantee you that that is happening, Chris. And so that's a good debate for YouTube to have. That does not make me feel hesitant about YouTube as a business. That makes me feel good because they need an identity. They need a niche. I think that ultimately it's going to grow out of the way that people habitually use YouTube. A longer form original programming breaks the habit of how people use YouTube. If you lean into the habit and make shorter form programming,

there may be a lot of success here, but they do have to define their identity for that next stage. We're a destination for you to consume original content. Here's what we offer. As long as it fits with the way people habitually use YouTube, I think it will be highly successful. But they do need to figure that out. I think you're exactly right. Let's move from video content to video games. At its event on Monday, Apple introduced a new video game subscription service called Arcade. This comes a week after Google introduced its own service called Stadia, which is a cloud-based streaming platform. Did one of them impress you more than the other? No, but they're both a strong signal for what's coming in video games. It's been a long time

coming that a web browser would become a standard video game interface. It's been that way for a very long time on the windows pc it really hasn't been that way on the mac or on a chromebook or in other areas we now have different options for connecting your tv to limited boxes where you have limited computing that will become a game console just like it was back when i was a kid i really think that this has been a long time coming and because it's been a long time coming I think it feels very, very new and fresh. It's really not, but it is, pardon the pun here, game-changing. The console is not the event that it used to be.

Every two or three years, we'd have a brand-new console and a lot of games backed up to that, and that isn't the same event that it used to be. However, the software is the big event now. Now, Red Dead Redemption, Take-Two Interactive released Red Dead Redemption to, I believe it was a $700 million opening. That is incredible. It's bigger than a movie. That's how video games have changed.

But what's happened now is you have those openings, and then you have a rolling distribution, also like a movie. So a movie would open in theaters, and then it would go to DVD or Blu-ray, and then it would go to HBO, and then it would go into syndication. And so you had this very long tail of life for a successful movie. That's happening with video games. Stadia and what Apple is introducing are at the end of that long tail for video games, and I think it's a very smart move. I don't expect it to be really additive to either Apple or Google in the short term, but I do believe it's building, it's a necessary component for video games to have the same kind of long tail that the movie business has. And that really gives you a lot of choice as a gamer.

Well, and it seems like this is one more bit of evidence of how the video game industry is changing, and from my standpoint, becoming even more interesting to watch than video streaming, because you've essentially got a couple of types of offerings now. One is this subscription bundling, like Apple is trying to do with Arcade, aka the Netflix of video games, as Apple and others try to achieve that. And then you've got the standalone franchises, as you said, Red Dead Redemption 2, Call of Duty, FIFA World Cup, these huge tentpole games that can command hundreds of millions of dollars in a single opening week. Right. And so I think you're right about that. And the main difference in that area is in the

video streaming business, we really haven't figured out yet how to take an original movie, let's say on Netflix, and have that broad-based distribution after release on Netflix. That hasn't really happened yet. There is no opportunity for an actor who signs up for a Netflix original movie to earn residuals. That's highly unusual. For the past almost century, if you were an actor and you got linked on to a hit movie or a hit TV show, you could expect some residuals over time that was part of the way that you were set for life the friends cast for example they're still getting residuals and they're getting you know massive amounts of money because of that distribution syndication deal but that's not really true

in the video streaming world that still either is coming or will never come but we don't know But in video games, that mechanism is actually happening. So like Red Dead Redemption 2 releases to a big launch, and then it goes online. And as it goes online, then the game changes, and there are new episodes and new characters. And then they can make their way down to Apple Arcade and Google Stadia. And then there are new versions and new spinoffs, and that becomes a franchise in and of itself. So the video game industry is going to be very interesting to watch. Last thing before I let you go, when you and I talked last fall, I asked you for a stock you were excited about.

And to my surprise, you said Microsoft. You said Microsoft was arguably cooler and more innovative than Apple. Has anything changed in the last six months, or do you still feel that way? I still feel that way. And in fact, listeners who want to go read it can go to fool.com and read my article about why Satya Nadella may be tech's best CEO. I think Microsoft is in the best position it's ever been, and I won't go into the technical details of why, but Microsoft is using interoperability, the ability to get its products in front of you and give you a pleasing experience any way it can, whether it's through an Android phone or a Chrome browser. They're using that mechanism to get you into a Microsoft product, and it's working. It's a brilliant strategy, and I don't think it would have happened without a developer at the top of the business.

I think Satya Nadella is the best in the business right now, including better than Tim Cook. Tim Byers covers media and entertainment for The Motley Fool. Tim, always good talking to you. Same here, Chris. Appreciate it. 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. Hey, before we get to the stocks on our radar, quick shout out to Hello Monday, the new podcast from LinkedIn.

Sunday night, you've been there. I've been there. We've all been there. You get the Sunday night blues when you start thinking about your work week. But what if Monday was something you could actually look forward to? Hello Monday examines work, how to change it, how to like it, and maybe even how to love it. Each week, host Jessie Hempel sits down with featured guests to investigate the role that work plays in our lives. Her first guest right out of the gate was Seth Meyers.

I very much enjoyed that episode. I really like what Jessie is doing with this show. I got the chance to talk to her, just had a phone call with her before this show launched. and I really like how she's approaching these interviews. It's great stuff. You can check it out. You can find Hello Monday on Apple Podcasts or wherever you listen to podcasts. 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, Aaron Bush, and Ron Gross. Time to get to the stocks on our radar. Ron, you're up first. Our man behind the glass, Steve Broido, is going to hit you with a question. What do you got? Ron Gross. Stick with me, Stevie. Hill Rom Holdings, HRC, spun off from Hill & Brand in 2008, a medical equipment company, a recent recommendation here at The Motley Fool. They have a long-established presence in the medical equipment market, 14 consecutive quarters of double-digit earnings growth. Great opportunities in connective care and technology. International expansion is a great opportunity as well. They've raised their dividend for eight consecutive

years. Very strong management team, well-run company. Steve, question about Hill-Rom Holdings. What medical device are they best known for? I'm going to say they're best known for cardiac monitoring, some ophthalmology equipment as well that they got through an acquisition, some respiratory care equipment as well. Jason Moser, what are you looking at? The power of the burrito, Chris. It is unbelievable to me. But Chipotle Mexican Grill, ticker CMG, the stock is up 66% this year alone. But you know what? I'm digging in there and I'm starting to see why, actually. Brian Niccol has the full faith of investors

everywhere that he knows what he's doing. And if you've been to a Chipotle recently, you probably have noticed a little bit of a difference. I certainly have. The in-store experience is much improved. They're incorporating these digital order pickup areas, much like the Panera across the street. The food is better. They've got a legit rewards program now. I'm actually a member of that, too. How's the case, though? Stabilizer-free? I was never that critical of it to begin with, OK? But either way, I think it's gotten better. But I think most of all, he's actually taken them off of that pedestal that we were always so critical about under Al's leadership. And now, I think it's a little bit less of a target there.

So, the shares are 56X forward earnings. I'm not sure it justifies that valuation, but they're doing one heck of a job. Steve, question about Chipotle? I think they still sell alcohol. Is that a good idea? Yes or no? Absolutely. Aaron Bush, what are you looking at? I'm going to go back to Zoom, and I just want to share some reasons why I think Zoom is so interesting. So, looking at their S-1, their revenue growth over the past year was

118%. Their expansion rates were best-in-class. Their payback period to breakeven is nine months, which is fantastic for an enterprise software company. They're already profitable, which at this stage is very rare for this type of company. Their balance sheet is rock solid. And it reminds me of Atlassian in some ways at a much earlier stage, which has been a fantastic stock in its own right. It's still founder-led. The founder owns something like 20% of shares, I think investors are going to maybe make a lot of money in Zoom. Steve? When do you expect them to go public?

Probably in the next couple months. You got one you want to add to your watch list, Steve? We use Zoom here. I love it. So I'm going with Zoom. I knew it. All right, guys. Thanks for being here.

That's going to do it for this week's show. We'll see you next week.